LIABILITY FOR DAMAGESG.R. No. L-9596 February 11, 1916

MARCOS MENDOZA, plaintiff-appellee, vs. FRANCISCO DE LEON, ET AL., defendants-appellants.TRENT, J.:

This is an action for damages against the individual members of the municipal council of the municipality of Villasis, Pangasinan, for the revocation of the lease of an exclusive ferry privilege duly awarded to the plaintiff under the provisions of Act No. 1643 of the Philippine Commission. After use of a little more than one year, the plaintiff was forcibly ejected under and pursuance of a resolution adopted by the herein defendants, awarding a franchise for the same ferry to another person.

Municipalities of the Philippine Islands organized under the Municipal Code have both governmental and corporate or business functions. Of the first class are the adoption of regulation against fire and disease, preservation of the public peace, maintenance of municipal prisons, establishment of primary schools and post-offices, etc. Of the latter class are the establishment of municipal waterworks for the use of the inhabitants, the construction and maintenance of municipal slaughterhouses, markets, stables, bathing establishments, wharves, ferries, and fisheries. Act No. 1643 provides that the use of each fishery, fish-breeding ground, ferry, stable, market, and slaughterhouse belonging to any municipality or township shall be let to the highest bidder annually or for such longer period not exceeding five years as may have been previously approved by the provincial board of the province in which the municipality or township is located.

The two fold character of the powers of a municipality under our Municipal Code (Act No. 82) is so apparent and its private or corporate powers so numerous and important that we find no difficulty in reaching the conclusion that the general principles governing the liability of such entities to applicable to it. The distinction between governmental powers on the one hand, and corporate or proprietary or business powers on the other, as the latter class is variously described in the reported cases, has been long recognized in the United States and there is no dissent from the doctrine.

In Wilcox vs. City of Rochester (190 N. Y., 137), it was said:

The broad general doctrine of the Maxmilian case (Maxmilian vs. Mayor, etc., New York, 62 N. Y. 160), which is certainly not now open to question in the courts of this State, is that "two kinds of duties are imposed on municipal corporations, the one governmental and a branch of the general administration of the state, the other quasi private or corporate;" and "that in the exercise of the latter duties the municipality is liable for the acts of its officers and agents, while in the former it is not." (Cullen, J., in Lefrois vs. Co. of Monroe, 162 N. Y., 563, 567.)

The Maxmilian case is quoted with approval in Bond vs. Royston (130 Ga., 646).

In Co. Comm's of Anne Arundel Co. vs. Duckett (20 Md., 468, 476; 83 Am. Dec., 557), it was said:

With regard to the liability of a public municipal corporation for the acts of its officers, the distinction is between an exercise of those legislative powers which it holds for public purposes, and as part of the government of the country, and those private franchise which belong to it, as a creation of the law; within the sphere of the former, it enjoys, the exemption of the government, from responsibility for its own acts, and for the acts of those who are independent corporate officers, deriving their rights and duties from the sovereign power. But in regard to the latter, it is responsible for the acts of those who are in law its agents, though they may not be appointed by itself.

This case was quoted with approval in Trammell vs. Russellville (34 Ark., 105; 36 Am. Rep., 1); and in McIlhenney vs. Wilmington (127 N. C., 146; 50 L. R. A. 470).

In Cummings vs. Lobsitz (42 Okla., 704; L. R. A., N. S., 1915 B, p. 415), it was said:

A distinction is made between the liability of a municipal corporation for the acts of its officers in the exercise of powers which it possesses for public purpose and which it holds as agent of the state, and those powers which embrace private or corporate duties and are exercised for the advantage of the municipality and its inhabitants. When the acts of its officers come within the powers which it has as agent of the state, it is exempt from liability for its own acts and the acts of its officers; if the acts of the officer or agent of the city are for the special benefits of the corporation in its private or corporate interest, such officer is deemed the agent or servant of the city, but where the act is not in relation to a private or corporate interest of the municipality, but for the benefit of the public at large, such acts by the agents and servants are deemed to be acts by public or state officers, and for the public benefit.

The distinction is also recognized by Dillon in his work on Municipal Corporations (5th ed.) section 38 and 39.

As is indicated in some of the above quoted cases, the municipality is not liable for the acts of its officers or agents in the performance of its governmental functions. Governmental affairs do not lose their governmental character by being delegated to the municipal governments. Nor of the municipality which, for convenience the state allows the municipality to select, change their character. To preserve the peace, protect the morals and health of the community and so on to administer government, whether it be done by the central government itself or is shifted to a local organization. And the state being immune for injuries suffered by private individuals in the administration of strictly governmental functions, like immunity is enjoyed by the municipality in the performance of the same duties, unless it is expressly made liable by statute.

The state cannot, without its consent expressed through legislation, be sued for injuries resulting from an act done in the exercise of its lawful governmental powers and pertaining to the administration of government. ... Municipal corporations are agents of the state in the exercise of certain governmental powers. The preservation of the health and peace of its inhabitants and fire protection afforded the property owner, are governmental functions. (Burke vs. City of South Omaha, 79 Neb., 793.)

In Nicholson vs. Detroit (129 Mich., 246; 56 L. R. A., 601), it was said:

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It is the well-settled rule that the state is not liable to private persons who suffer injuries through the negligence of its officers — and the rule extends to township and cities — while in the performance of state functions, imposed upon them by law. This subject is fully discussed in Detroit vs. Blackeby (21 Mich., 84; 4 Am. Rep., 450). It was there held that cities are governmental agencies, and that their "officers are in no such sense municipal agents; that their negligence is the neglect of the municipality; nor will their misconduct be chargeable against them, unless act complained of the either authorized or ratified." And in a large number of cases it has been held that there is no such liability on the part of such governmental agency unless it has been imposed by statute, and in such case it is necessarily limited by the statute.

In Claussen vs. City of Luverne (103 Minn., 491; 15 L. R. A., N. S., 698), it was said:

It is elementary that neither the state nor any of the subdivisions, like a municipality, through which it operates, is liable for torts committed by public officers, save in definitely excepted classes of cases. The exemption is based upon the sovereign character of the state and its agencies, and upon the absence of obligation, and not on the ground that no means for remedy have been provided. "The government," said Mr. Justice Story, "does not undertake to guarantee to any person the fidelity of the officers or agents whom it employs, since that would involve in all its operations in endless embarrassments, difficulties and losses, which would be subversive of the public interest." (U.S. vs. Kirkpatrick, 9 Wheat., 720; 6 L. ed., 199; Beers vs. Arkansas, 20 How., 527; 15 L. ed., 991.) This general exemption has been applied to municipal corporations in so far as the acts complained of were, in the language of the memorandum of the trial court, "done in exercising powers for the public at large as a governing agency." While so acting, the city cannot be held liable for misfeasance; and ... the rule of respondeat superior has no application.

Nor are officers or agents of the Government charged with the performance of governmental duties which are in their nature legislative, or quasi judicial, liable for the consequences of their official acts, unless it be shown that they act willfully and maliciously, and with the express purpose of inflicting injury upon the plaintiff. If they exercise their honest judgment in the performance of their duties, their errors cannot be charged against them. (People vs. May, 251 Ill., 54; Salt Lake County vs. Clinton [Utah, 1911], 117 Pac., 1075; Comanche County vs. Burks (Tex. Civ. App., 1914), 166 S. W., 470; Monnier vs. Godbold, 116 La., 165; 5 L. R. A., N. S., 463; Ray vs. Dodd, 132 Mo. App., 444; Johnson vs. Marsh, 82 N. J. L.M, 4; Gregory vs. Brooks, 37 Conn., 3645; Lecourt vs. Gaster, 50 La. Ann., 521.) So it may be said that in so far as its governmental functions are concerned, a municipality is not liable at all, unless expressly made so by statute; nor are its officers, so long as they perform their duties honestly and in good faith. The most common illustration of both phrases of this rule is the action for false imprisonment so often brought either against a municipality or a municipal police officer. (Bartlett vs. City of Columbus, 101 Ga., 300; 44 L. R. A., 795; Peter vs. City of Lindborg, 40 Kan., 654.) So, in Field vs. City of Des Moines (39 Iowa, 575), it was held that a municipality, acting under authority given it by the central government to destroy houses in the path of a conflagration, was not liable in damages in the absence of a statute expressly making it so.

From what has already been said, it should be clear that a municipality is not exempt from liability for the negligent performance of its corporate or proprietary or business functions. In the administration of its patrimonial property, it is to be regarded as a private corporation or individual so far as its liability to third persons on contract or in tort is concerned. Its contracts, validly entered into, may be enforced and damages may be collected from it for the torts of its officers or agents within the scope of their employment in precisely the same manner and to the same extent as those of private corporations or individuals. As to such matters the principles of respondeat superior applies. It is for these purposes that the municipality is made liable to suits in the courts.

Municipal corporations are subject to be sued upon contracts and in tort. In a previous chapter we have considered at length the authority of such corporations to make contracts, the mode of exercising, and the effect of transcending the power. This leaves but little to add in this place respecting their liability in actions ex contractu. Upon an authorized contract — that is, upon a contract within the scope of the charter or legislative powers of the corporation and duly made by the proper officers or agents — they are liable in the same manner and to the same extent as private corporations or natural persons. (Dillon on Municipal Corporations, 5th ed., sec. 1610.)

The same author says in section 1647:

The rule of law is a general one, that the superior or employer must answer civilly of the negligence or want of skill of his agent or servant in the course or line of his employment, by which another, who is free from contributory fault, is injured. Municipal corporations, under the conditions herein stated, fall within the operation of this rule of law, and are liable, accordingly, to civil actions for damages when the requisite elements of liability coexist. To create such liability, it is fundamentally necessary that the act done which is injurious to others must be within the scope of the corporate powers as prescribed by charter or positive enactment (the extent of which powers all persons are bound, at their peril, know); in other words, it must not be ultra vires in the sense that it is not within the power or authority of the corporation to act in reference to it under any circumstances. If the act complained of necessarily lies wholly outside of the general or special powers of the corporation as conferred in its charter or by statute, the corporation can in no event be liable to an action for damages, whether it directly commanded the performance of the act whether it be done by its officers without its express command; for a corporation cannot of course be impliedly liable to a greater extent than it could make itself by express corporate vote or action.

It often happens that the same agent or agency has both a governmental and a corporate character. Such, for instance, are a municipal water system designed both for protection against fire (a governmental function) and to supply water to the inhabitants for profit (a corporate function) (Omaha Water Co. vs. Omaha, 12 L.R.A., N. S., 736l 77 C.C.A., 267; 147 Fed., 1; Judson vs. Borough of Winsted, 80 Conn., 3841 15 L. R. A., N. S., 91); a municipal light plant both for lighting the streets (a governmental function) and for furnishing light to the inhabitants at a profit (a corporate function) (Fisher vs. NewBern, 140 N. C., 506; 111 Am. St. Rep., 857); an agent who is at the same time a police officer and a caretaker of a municipal toll bridge (Woodhull vs. Mayor, etc., of New York, 150 N. Y., 450). It is, also, sometimes the case that considerable difficulty is experienced in determining whether a particular municipal duty is governmental or corporate.

But questions such as these do not arise in the case at bar. Here is it clear that the leasing of a municipal ferry to the highest bidder for a specified period of time is not a governmental but a corporate function. Such a lease, when validly entered into, constitutes a contract with the lessee which the municipality is bound to respect. The matter is thus summed up by Dillon on Municipal Corporations (5th ed., sec. 1306):

Ordinances made by municipalities under charter or legislative authority, containing grants to water and light companies and other public service corporations of the right to use the streets for pipes, mains, etc., upon the condition of the performance of service by

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the grantee, are, after acceptance and performance by the grantee, contracts protected by the prohibition of the Federal Constitution against the enactment of any State law impairing the obligation of contracts.

Again, this author, adopting the language of the court in In re Fay (15 Pick. [Mass.], 243), says, in section 277:

If a municipal corporation, seized of a ferry, lease the same, through the agency of the mayor and aldermen, with a covenant of quiet enjoyment, this covenant will not restrain in them by statute, to license another ferry over the same waters, if in their judgment (which cannot be reviewed by the courts) the public necessity and convenience require it. On such a covenant the city may be liable to the covenantees; but the powers vested in the city officers as trustees for the public cannot be thus abrogated. If, however, city in its corporate capacity is the legal owner of an exclusive franchise, its grantees or lessees would hold it, notwithstanding any license to others, whether granted by the mayor and aldermen or any other tribunal.

It seems clear, therefore, that under the provisions of Municipal Code and Act No. 1634, above referred to, the plaintiff had a vested right to the exclusive operation of the ferry in question for the period of his lease. Were the municipality a party to this action, it would be patent that a judgment for damages against it for the rescission of the contract would be proper. This, be it said, is the usual method of exacting damages, either ex contractu or ex delicto arising from the exercise of corporate powers of municipalities. But the present action is against the members of the municipal council personally, and the question arises: Are they liable? In administering the patrimonial property of municipalities, the municipal council occupies, for most purposes, the position of a board of directors of a private corporation. In disposing of the local public utilities, if the term may be used, such as the fishing and ferry rights, etc., they must exercise considerable judgment. It required some considerable amount of business acumen to compel performance on the part of lessees of these privileges in accordance with the terms of their leases and in a manner which will not cause the property to deteriorate. Questions must continually arise which are not expressly provided for in contracts and which must be settled, if possible, in a manner that will preserve the just claims of the municipality. Indeed, it is not at all improbable that on occasion the councilors may have reason to believe that a particular contract has been rescinded by the other party or has never been legally entered into, in both of which cases, decisive steps must be taken to safeguard the interest of the municipality. Thus, in Municipality of Moncada vs. Cajuigan (21 Phil. Rep., 184), the lessee of a municipal fishery was evicted for failing to pay his quarterly rents. The municipal authorities rightly held that the contract was rescinded but forcibly evicted the lessee instead of resorting to the courts. Hence, in an action by the municipality against the lessee and his bondsmen to recover rent arrears, damages were allowed the lessee on his counterclaim for the loss caused by the forcible eviction. Nevertheless, we do not think the councilors could have been held personally liable for their error in resorting to forcible eviction of the lessee. Theirs was an error of judgment, and honest mistake on their part as to the rights of the municipality in the premises. We think the rule of personal liability should be with municipal councilors in such matters as it is with the directors or managers of an ordinary private corporation.

Under the rule that directors are not liable for mistakes of judgment, it follows naturally that they are not liable for the mismanagement of the corporate affairs where such mismanagement is a mistake of judgment. The wisdom of this rule is not only approved by common experience but by law writers and all courts. A rule so rigid as to hold directors personally liable for honest mistakes in corporate management would deter all prudent business men from accepting such positions. The remedy of stockholders in all such cases is by a change in the directory. ... The rule is that courts will not interfere even in the doubtful cases. But directors and managing officers may be liable for mismanagement to warrant the interposition of a court either as against the contemplated action of the directors, or a majority of the stockholders, or to give relief by way of damages after the action as been taken; a case must be made out which plainly shows that such action is so far opposed to the true interests of the corporation itself as to lead to clear inference that no one thus acting could have been influenced by any honest desire to secure such interests, but that he must have acted with an intent to subserve some outside purpose, regardless of the consequences to the corporation, and in a manner inconsistent with its interests. (Thompson on Corporations, sec. 1298.)

In the case at bar, there is not a scintilla of evidence that there was any justifiable reason for forcibly evicting the plaintiff from the ferry which he had leased. On the contrary, the defendant councilors attempted to justify their action on the ground that the ferry which he was operating was not the one leased to him; this, in spite of the fact that the vice-president had personally placed him in possession of it more than a year before, and the fact that he had operated this ferry for over year, evidently with the knowledge of the defendants. The evidence is so clear that the ferry of which the plaintiff was dispossessed was the one which he leased that no reasonable man would entertain any doubt whatever upon the question. Hence, we cannot say that in rescinding the contract with the plaintiff, thereby making the municipality liable to an action for damages for no valid reason at all, the defendant councilors were honestly acting for the interests of the municipality. We are, therefore, of the opinion that the defendants are liable jointly and severally for the damages sustained by the plaintiff from the rescission of his contract of lease of the ferry privilege in question. In reaching this conclusion, we have not failed to take into consideration the rule enunciated in Dennison vs. The Moro Province (R.G. No. 8173, March 28, 1914; not reported), nor the distinction made by the courts in the United States between the liability of a municipal corporation, made such acceptance of a village or city charter, and the involuntary quasi corporations known as counties, towns, school districts, and especially the townships of New England. Upon the question of the amount of damages sustained, we accept the findings of the lower court.

For the foregoing reasons, the judgment appealed from is affirmed, with cost. So ordered.

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G.R. No. L-29993 October 23, 1978LAUDENCIO TORIO, GUILLERMO EVANGELISTA, MANUEL DE GUZMAN, ALFONSO R. MAGSANOC, JESUS MACARANAS, MAXIMO

MANANGAN, FIDEL MONTEMAYOR, MELCHOR VIRAY, RAMON TULAGAN, all Members of the Municipal Council of Malasiqui in 1959, Malasiqui, Pangasinan, petitioners,

vs.ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA, ERNESTO, NORMA, VIRGINIA, REMEDIOS and ROBERTO, all

surnamed FONTANILLA, and THE HONORABLE COURT OF APPEALS, respondents.

G.R. No. L-30183 October 23, 1978MUNICIPALITY OF MALASIQUI, petitioner,

vs.ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA, ERNESTO, NORMA, VIRGINIA, REMEDIOS and ROBERTO, all

surnamed FONTANILLA, and the Honorable COURT OF APPEALS, respondents.

MUÑOZ PALMA, J.:

These Petitions for review present the issue of whether or not the celebration of a town fiesta authorized by a municipal council under Sec. 2282 of the Municipal Law as embodied in the Revised Administrative Code is a governmental or a corporate or proprietary function of the municipality.

A resolution of that issue will lead to another, viz the civil liability for damages of the Municipality of Malasiqui, and the members of the Municipal Council of Malasiqui, province of Pangasinan, for a death which occurred during the celebration of the town fiesta on January 22, 1959, and which was attributed to the negligence of the municipality and its council members.

The following facts are not in dispute:

On October 21, 1958, the Municipal Council of Malasiqui, Pangasinan, passed Resolution No. 159 whereby "it resolved to manage the 1959 Malasiqui town fiesta celebration on January 21, 22, and 23, 1959." Resolution No. 182 was also passed creating the "1959 Malasiqui 'Town Fiesta Executive Committee" which in turn organized a sub-committee on entertainment and stage, with Jose Macaraeg as Chairman. the council appropriated the amount of P100.00 for the construction of 2 stages, one for the "zarzuela" and another for the cancionan Jose Macaraeg supervised the construction of the stage and as constructed the stage for the "zarzuela" was "5-½ meters by 8 meters in size, had a wooden floor high at the rear and was supported by 24 bamboo posts — 4 in a row in front, 4 in the rear and 5 on each side — with bamboo braces." 1

The "zarzuela" entitled "Midas Extravaganza" was donated by an association of Malasiqui employees of the Manila Railroad Company in Caloocan, Rizal. The troupe arrived in the evening of January 22 for the performance and one of the members of the group was Vicente Fontanilla. The program started at about 10:15 o'clock that evening with some speeches, and many persons went up the stage. The "zarzuela" then began but before the dramatic part of the play was reached, the stage collapsed and Vicente Fontanilla who was at the rear of the stage was pinned underneath. Fontanilia was taken to tile San Carlos General Hospital where he died in the afternoon of the following day.

The heirs of Vicente Fontanilia filed a complaint with the Court of First Instance of Manila on September 11, 1959 to recover damages. Named party-defendants were the Municipality of Malasiqui, the Municipal Council of Malasiqui and all the individual members of the Municipal Council in 1959.

Answering the complaint defendant municipality invoked inter alia the principal defense that as a legally and duly organized public corporation it performs sovereign functions and the holding of a town fiesta was an exercise of its governmental functions from which no liability can arise to answer for the negligence of any of its agents.

The defendant councilors inturn maintained that they merely acted as agents of the municipality in carrying out the municipal ordinance providing for the management of the town fiesta celebration and as such they are likewise not liable for damages as the undertaking was not one for profit; furthermore, they had exercised due care and diligence in implementing the municipal ordinance. 2

After trial, the Presiding Judge, Hon. Gregorio T. Lantin narrowed the issue to whether or not the defendants exercised due diligence 'm the construction of the stage. From his findings he arrived at the conclusion that the Executive Committee appointed by the municipal council had exercised due diligence and care like a good father of the family in selecting a competent man to construct a stage strong enough for the occasion and that if it collapsed that was due to forces beyond the control of the committee on entertainment, consequently, the defendants were not liable for damages for the death of Vicente Fontanilla. The complaint was accordingly dismissed in a decision dated July 10, 1962. 3

The Fontanillas appealed to the Court of Appeals. In a decision Promulgated on October 31, 1968, the Court of Appeals through its Fourth Division composed at the time of Justices Salvador V. Esguerra, Nicasio A. Yatco and Eulogio S. Serrano reversed the trial court's decision and ordered all the defendants-appellees to pay jointly and severally the heirs of Vicente Fontanilla the sums of P12,000.00 by way of moral and actual damages: P1200.00 its attorney's fees; and the costs. 4

The case is now before Us on various assignments of errors all of which center on the proposition stated at the sentence of this Opinion and which We repeat:

Is the celebration of a town fiesta an undertaking in the excercise of a municipality's governmental or public function or is it or a private or proprietary character?

1. Under Philippine laws municipalities are political bodies corporate and as such ag endowed with the faculties of municipal corporations to be exercised by and through their respective municipal governments in conformity with law, and in their proper corporate name, they may inter alia sue and be sued, and contract and be contracted with. 5

The powers of a municipality are twofold in character public, governmental or political on the one hand, and corporate, private, or proprietary on the other. Governmental powers are those exercised by the corporation in administering the powers of the state and promoting the public

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welfare and they include the legislative, judicial public, and political Municipal powers on the other hand are exercised for the special benefit and advantage of the community and include those which are ministerial private and corporate. 6

As to when a certain activity is governmental and when proprietary or private, that is generally a difficult matter to determine. The evolution of the municipal law in American Jurisprudence, for instance, has shown that; none of the tests which have evolved and are stated in textbooks have set down a conclusive principle or rule, so that each case will have to be determined on the basis of attending circumstances.

In McQuillin on Municipal Corporations, the rule is stated thus: "A municipal corporation proper has ... a public character as regards the state at large insofar as it is its agent in government, and private (so-called) insofar as it is to promote local necessities and conveniences for its own community. 7

Another statement of the test is given in City of Kokomo v. Loy, decided by the Supreme Court of Indiana in 1916, thus:

Municipal corporations exist in a dual capacity, and their functions are two fold. In one they exercise the right springing from sovereignty, and while in the performance of the duties pertaining thereto, their acts are political and governmental Their officers and agents in such capacity, though elected or appointed by the are nevertheless public functionaries performing a public service, and as such they are officers, agents, and servants of the state. In the other capacity the municipalities exercise a private. proprietary or corporate right, arising from their existence as legal persons and not as public agencies. Their officers and agents in the performance of such functions act in behalf of the municipalities in their corporate or in. individual capacity, and not for the state or sovereign power. (112 N. E 994-995)

In the early Philippine case of Mendoza v. de Leon 1916, the Supreme Court, through Justice Grant T. Trent, relying mainly on American Jurisprudence classified certain activities of the municipality as governmental, e.g.: regulations against fire, disease, preservation of public peace, maintenance of municipal prisons, establishment of schools, post-offices, etc. while the following are corporate or proprietary in character, viz: municipal waterwork, slaughter houses, markets, stables, bathing establishments, wharves, ferries, and fisheries. 8 Maintenance of parks, golf courses, cemeteries and airports among others, are also recognized as municipal or city activities of a proprietary character. 9

2. This distinction of powers becomes important for purposes of determining the liability of the municipality for the acts of its agents which result in an injury to third persons.

If the injury is caused in the course of the performance of a governmental function or duty no recovery, as a rule, can be. had from the municipality unless there is an existing statute on the matter, 10 nor from its officers, so long as they performed their duties honestly and in good faith or that they did not act wantonly and maliciously. 11 In Palafox, et al., v. Province of Ilocos Norte, et al., 1958, a truck driver employed by the provincial government of Ilocos Norte ran over Proceto Palafox in the course of his work at the construction of a road. The Supreme Court in affirming the trial court's dismissal of the complaint for damages held that the province could not be made liable because its employee was in the performance of a governmental function — the construction and maintenance of roads — and however tragic and deplorable it may be, the death of Palafox imposed on the province no duty to pay monetary consideration. 12

With respect to proprietary functions, the settled rule is that a municipal corporation can be held liable to third persons ex contract 13 or ex delicto. 14

Municipal corporations are subject to be sued upon contracts and in tort. ...

xxx xxx xxx

The rule of law is a general one, that the superior or employer must answer civilly for the negligence or want of skill of its agent or servant in the course or fine of his employment, by which another, who is free from contributory fault, is injured. Municipal corporations under the conditions herein stated, fall within the operation of this rule of law, and are liable, accordingly, to civil actions for damages when the requisite elements of liability co-exist. ... (Dillon on Municipal Corporations, 5th ed. Sec. 1610,1647, cited in Mendoza v. de Leon, supra. 514)

3. Coming to the cam before Us, and applying the general tests given above, We hold that the ho of the town fiesta in 1959 by the municipality of Malsiqui Pangasinan was an exercise of a private or proprietary function of the municipality.

Section 2282 of the Chatter on Municipal Law of the Revised Administrative Code provides:

Section 2282. Celebration of fiesta. — fiesta may be held in each municipality not oftener than once a year upon a date fixed by the municipal council A fiesta s not be held upon any other date than that lawfully fixed therefor, except when, for weighty reasons, such as typhoons, foundations, earthquakes, epidemics, or other public ties, the fiesta cannot be hold in the date fixed in which case it may be held at a later date in the same year, by resolution of the council.

This provision simply gives authority to the municipality to accelebrate a yearly fiesta but it does not impose upon it a duty to observe one. Holding a fiesta even if the purpose is to commemorate a religious or historical event of the town is in essence an act for the special benefit of the community and not for the general welfare of the public performed in pursuance of a policy of the state. The mere fact that the celebration, as claimed was not to secure profit or gain but merely to provide entertainment to the town inhabitants is not a conclusive test. For instance, the maintenance of parks is not a source of income for the nonetheless it is private undertaking as distinguished from the maintenance of public schools, jails, and the like which are for public service.

As stated earlier, there can be no hard and fast rule for purposes of determining the true nature of an undertaking or function of a municipality; the surrounding circumstances of a particular case are to be considered and will be decisive. The basic element, however beneficial to the public the undertaking may be, is that it is governmental in essence, otherwise. the function becomes private or proprietary in character. Easily, no overnmental or public policy of the state is involved in the celebration of a town fiesta. 15

4. It follows that under the doctrine of respondent superior, petitioner-municipality is to be held liable for damages for the death of Vicente Fontanilia if that was at- tributable to the negligence of the municipality's officers, employees, or agents.

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Art. 2176, Civil Code: Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. . .

Art. 2180, Civil Code: The obligation imposed by article 2176 is demandable not only for one's own acts or omission, but also for those of persons for whom one is responsible. . .

On this point, the Court of Appeals found and held that there was negligence.

The trial court gave credence to the testimony of Angel Novado, a witness of the defendants (now petitioners), that a member of the "extravaganza troupe removed two principal braces located on the front portion of the stage and u them to hang the screen or "telon", and that when many people went up the stage the latter collapsed. This testimony was not believed however by respondent appellate court, and rightly so. According to said defendants, those two braces were "mother" or "principal" braces located semi-diagonally from the front ends of the stage to the front posts of the ticket booth located at the rear of the stage and were fastened with a bamboo twine. 16 That being the case, it becomes incredible that any person in his right mind would remove those principal braces and leave the front portion of the stage practically unsuported Moreover, if that did happen, there was indeed negligence as there was lack of suspension over the use of the stage to prevent such an occurrence.

At any rate, the guitarist who was pointed to by Novado as the person who removed the two bamboo braces denied having done go. The Court of Appeals said "Amor by himself alone could not have removed the two braces which must be about ten meters long and fastened them on top of the stags for the curtain. The stage was only five and a half meters wide. Surely, it, would be impractical and unwieldy to use a ten meter bamboo pole, much more two poles for the stage curtain. 17

The appellate court also found that the stage was not strong enough considering that only P100.00 was appropriate for the construction of two stages and while the floor of the "zarzuela" stage was of wooden planks, the Post and braces used were of bamboo material We likewise observe that although the stage was described by the Petitioners as being supported by "24" posts, nevertheless there were only 4 in front, 4 at the rear, and 5 on each side. Where were the rest?

The Court of Appeals thus concluded

The court a quo itself attributed the collapse of the stage to the great number of onlookers who mounted the stage. The municipality and/or its agents had the necessary means within its command to prevent such an occurrence. Having filed to take the necessary steps to maintain the safety of the stage for the use of the participants in the stage presentation prepared in connection with the celebration of the town fiesta, particularly, in preventing non participants or spectators from mounting and accumulating on the stage which was not constructed to meet the additional weight- the defendant-appellees were negligent and are liable for the death of Vicente Fontanilla . (pp. 30-31, rollo, L-29993)

The findings of the respondent appellate court that the facts as presented to it establish negligence as a matter of law and that the Municipality failed to exercise the due diligence of a good father of the family, will not disturbed by Us in the absence of a clear showing of an abuse of discretion or a gross misapprehension of facts." 18

Liability rests on negligence which is "the want of such care as a person of ordinary prudence would exercise under the circumstances of the case." 19

Thus, private respondents argue that the "Midas Extravaganza" which was to be performed during the town fiesta was a "donation" offered by an association of Malasiqui employees of the Manila Railroad Co. in Caloocan, and that when the Municipality of Malasiqui accepted the donation of services and constructed precisely a "zarzuela stage" for the purpose, the participants in the stage show had the right to expect that the Municipality through its "Committee on entertainment and stage" would build or put up a stage or platform strong enough to sustain the weight or burden of the performance and take the necessary measures to insure the personal safety of the participants. 20 We agree.

Quite relevant to that argument is the American case of Sanders v. City of Long Beach, 1942, which was an action against the city for injuries sustained from a fall when plaintiff was descending the steps of the city auditorium. The city was conducting a "Know your City Week" and one of the features was the showing of a motion picture in the city auditorium to which the general public was invited and plaintiff Sanders was one of those who attended. In sustaining the award for Damages in favor of plaintiff, the District Court of Appeal, Second district, California, held inter alia that the "Know your City Week" was a "proprietary activity" and not a "governmental one" of the city, that defendant owed to plaintiff, an invitee the duty of exercising ordinary care for her safety, and plaintiff was entitled to assume that she would not be exposed to a danger (which in this case consisted of lack of sufficient illumination of the premises) that would come to her through a violation of defendant duty. 21

We can say that the deceased Vicente Fontanilla was similarly situated as Sander The Municipality of Malasiqui resolved to celebrate the town fiesta in January of 1959; it created a committee in charge of the entertainment and stage; an association of Malasiqui residents responded to the call for the festivities and volunteered to present a stage show; Vicente Fontanilla was one of the participants who like Sanders had the right to expect that he would be exposed to danger on that occasion.

Lastly, petitioner or appellant Municipality cannot evade ability and/or liability under the c that it was Jose Macaraeg who constructed the stage. The municipality acting through its municipal council appointed Macaraeg as chairman of the sub-committee on entertainment and in charge of the construction of the "zarzuela" stage. Macaraeg acted merely as an agent of the Municipality. Under the doctrine of respondent superior mentioned earlier, petitioner is responsible or liable for the negligence of its agent acting within his assigned tasks. 22

... when it is sought to render a municipal corporation liable for the act of servants or agents, a cardinal inquiry is, whether they are the servants or agents of the corporation. If the corporation appoints or elects them, can control them in the discharge of their duties, can continue or remove the can hold them responsible for the manner in which they discharge their trust, and if those duties relate to the exercise of corporate powers, and are for the benefit of the corporation in its local or special interest, they may justly be regarded as its agents or servants, and the maxim of respondent superior applies." ... (Dillon on Municipal Corporations, 5th Ed., Vol IV, p. 2879)

5. The remaining question to be resolved centers on the liability of the municipal councilors who enacted the ordinance and created the fiesta committee.

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The Court of Appeals held the councilors jointly and solidarity liable with the municipality for damages under Article 27 of the Civil Code which provides that d any person suffering ing material or moral loss because a public servant or employee refuses or neglects, without just cause to perform his official duty may file an action for damages and other relief at the latter. 23

In their Petition for review the municipal councilors allege that the Court of Appeals erred in ruling that the holding of a town fiesta is not a governmental function and that there was negligence on their part for not maintaining and supervising the safe use of the stage, in applying Article 27 of the Civil Code against them and in not holding Jose Macaraeg liable for the collapse of the stage and the consequent death of Vicente Fontanilla. 24

We agree with petitioners that the Court of Appeals erred in applying Article 27 of the Civil Code against the for this particular article covers a case of nonfeasance or non-performance by a public officer of his official duty; it does not apply to a case of negligence or misfeasance in carrying out an official duty.

If We are led to set aside the decision of the Court of Appeals insofar as these petitioners are concerned, it is because of a plain error committed by respondent court which however is not invoked in petitioners' brief.

In Miguel v. The Court of appeal. et al., the Court, through Justice, now Chief Justice, Fred Ruiz Castro, held that the Supreme Court is vested with ample authority to review matters not assigned as errors in an appeal if it finds that their consideration and resolution are indispensable or necessary in arriving at a just decision in a given case, and that tills is author under Sec. 7, Rule 51 of the Rules of Court. 25 We believe that this pronouncement can well be applied in the instant case.

The Court of Appeals in its decision now under review held that the celebration of a town fiesta by the Municipality of Malasiqui was not a governmental function. We upheld that ruling. The legal consequence thereof is that the Municipality stands on the same footing as an ordinary private corporation with the municipal council acting as its board of directors. It is an elementary principle that a corporation has a personality, separate and distinct from its officers, directors, or persons composing it 26 and the latter are not as a rule co-responsible in an action for damages for tort or negligence culpa aquilla committed by the corporation's employees or agents unless there is a showing of bad faith or gross or wanton negligence on their part. 27

xxx xxx xxx

The ordinary doctrine is that a director, merely by reason of his office, is not personally Stable for the torts of his corporation; he Must be shown to have personally voted for or otherwise participated in them ... Fletcher Encyclopedia Corporations, Vol 3A Chapt 11, p. 207)

Officers of a corporation 'are not held liable for the negligence of the corporation merely because of their official relation to it, but because of some wrongful or negligent act by such officer amounting to a breach of duty which resulted in an injury ... To make an officer of a corporation liable for the negligence of the corporation there must have been upon his part such a breach of duty as contributed to, or helped to bring about, the injury; that is to say, he must be a participant in the wrongful act. ... (pp. 207-208, Ibid.)

xxx xxx xxx

Directors who merely employ one to give a fireworks Ambition on the corporate are not personally liable for the negligent acts of the exhibitor. (p. 211, Ibid.)

On these people We absolve Use municipal councilors from any liability for the death of Vicente Fontanilla. The records do not show that said petitioners directly participated in the defective construction of the "zarzuela" stage or that they personally permitted spectators to go up the platform.

6. One last point We have to resolve is on the award of attorney's fees by respondent court. Petitioner-municipality assails the award.

Under paragraph 11, Art. 2208 of the Civil Code attorney's fees and expenses of litigation may be granted when the court deems it just and equitable. In this case of Vicente Fontanilla, although respondent appellate court failed to state the grounds for awarding attorney's fees, the records show however that attempts were made by plaintiffs, now private respondents, to secure an extrajudicial compensation from the municipality: that the latter gave prorases and assurances of assistance but failed to comply; and it was only eight month after the incident that the bereaved family of Vicente Fontanilla was compelled to seek relief from the courts to ventilate what was believed to be a just cause. 28

We hold, therefore, that there is no error committed in the grant of attorney's fees which after all is a matter of judicial discretion. The amount of P1,200.00 is fair and reasonable.

PREMISES CONSIDERED, We AFFIRM in toto the decision of the Court of Appeals insofar as the Municipality of Malasiqui is concerned (L-30183), and We absolve the municipal councilors from liability and SET ASIDE the judgment against them (L-9993).

Without pronouncement as to costs.

SO ORDERED,

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G.R. No. 72841 January 29, 1987PROVINCE OF CEBU, petitioner, vs. HONORABLE INTERMEDIATE APPELLATE COURT and ATTY. PABLO P. GARCIA, respondents.

GUTIERREZ, JR., J.:

This is a petition to review the decision of the respondent Intermediate Appellate Court in A.C. G.R. CV No. 66502 entitled "Governor Rene Espina, et. at v. Mayor Sergio Osmeña, Jr., et. al, Atty. Pablo P. Garcia v. Province of Cebu" 1 affirming with modification the order of the Court of First Instance of Cebu, Branch VII, granting respondent Pablo P. Garcia's claim for compensation for services rendered as counsel in behalf of the respondent Province of Cebu.

The facts of the case are not in dispute. On February 4, 1964, while then incumbent Governor Rene Espina was on official business in Manila, the Vice-Governor, Priscillano Almendras and three (3) members of the Provincial Board enacted Resolution No. 188, donating to the City of Cebu 210 province. owned lots all located in the City of Cebu, with an aggregate area of over 380 hectares, and authorizing the Vice-Governor to sign the deed of donation on behalf of the province. The deed of donation was immediately executed in behalf of the Province of Cebu by Vice-Governor Almendras and accepted in behalf of the City of Cebu by Mayor Sergio Osmeña, Jr. The document of donation was prepared and notarized by a private lawyer. The donation was later approved by the Office of the President through Executive Secretary Juan Cancio.

According to the questioned deed of donation the lots donated were to be sold by the City of Cebu to raise funds that would be used to finance its public improvement projects. The City of Cebu was given a period of one (1) year from August 15, 1964 within which to dispose of the donated lots.

Upon his return from Manila, Governor Espina denounced as Legal and immoral the action of his colleagues in donating practically all the patrimonial property of the province of Cebu, considering that the latter's income was less than one. fourth (1/4) of that of the City of Cebu.

To prevent the sale or disposition of the lots, the officers and members of the Cebu Mayor's League (in behalf of their respective municipalities) along with some taxpayers, including Atty. Garcia, filed a case seeking to have the donation declared illegal, null and void. It was alleged in the complaint that the plaintiffs were filing it for and in behalf of the Province of Cebu in the nature of a derivative suit. Named defendants in the suit were the City of Cebu, City Mayor Sergio Osmeña, Jr. and the Cebu provincial officials responsible for the donation of the province-owned lots. The case was docketed as Civil Case No. R-8669 of the Court of First Instance of Cebu and assigned to Branch VI thereof.

Defendants City of Cebu and City Mayor Osmeña, Jr. filed a motion to dismiss the case on the ground that plaintiffs did not have the legal capacity to sue.

Subsequently, in an order, dated May, 1965, the court dismissed Case No. R-8669 on the ground that plaintiffs were not the real parties in interest in the case. Plaintiffs filed a motion for reconsideration of the order of dismissal. This motion was denied by the Court.

Meanwhile, Cebu City Mayor Sergio Osmeña, Jr. announced that he would borrow funds from the Philippine National Bank (PNB) and would use the donated lots as collaterals. In July, 1965, the City of Cebu advertised the sale of an the lots remaining unsold. Thereupon, Governor Espina, apprehensive that the lots would be irretrievably lost by the Province of Cebu, decided to go to court. He engaged the services of respondent Garcia in filing and prosecuting the case in his behalf and in behalf of the Province of Cebu.

Garcia filed the complaint for the annulment of the deed of donation with an application for the issuance of a writ of preliminary injunction, which application was granted on the same day, August 6, 1965.

The complaint was later amended to implead Cebu City Mayor Carlos P. Cuizon as additional defendant in view of Fiscal Numeriano Capangpangan's manifestation stating that on September 9, 1965, Sergio Osmeña, Jr. filed his certificate of Candidacy for senator, his position/office having been assumed by City Mayor Carlos P. Cuizon.

Sometime in 1972, the Provincial Board passed a resolution authorizing the Provincial Attorney, Alfredo G. Baguia, to enter his appearance for the Province of Cebu and for the incumbent Governor, Vice-Governor and members of the Provincial Board in this case.

On January 30, 1973, Alfredo G. Baguia, Provincial Attorney of the Province of Cebu, entered his appearance as additional counsel for the Province of Cebu and as counsel for Governor Osmundo Rama, Vice-Governor Salutario Fernandez and Board Members Leonardo Enad, Guillermo Legazpi, and Rizalina Migallos.

On January 31, 1973, Atty. Baguia filed a complaint in intervention stating that intervenors Province of Cebu and Provincial Board of Cebu were joining or uniting with original plaintiff, former Governor of Cebu, Rene Espina. They adopted his causes of action, claims, and position stated in the original complaint filed before the court on August 6, 1965.

On June 25, 1974, a compromise agreement was reached between the province of Cebu and the city of Cebu. On July 15, 1974, the court approved the compromise agreement and a decision was rendered on its basis.

On December 4, 1974, the court issued an order directing the issuance of a writ of execution to implement the decision dated July 15, 1974, to wit:

1. Ordering the City of Cebu to return and deliver to the Province of Cebu all the lots enumerated in the second paragraph hereof;

2. Ordering the Province of Cebu to pay the amount of One Million Five Hundred Thousand Pesos (P1,500,000.00) to the City of Cebu for and in consideration of the return by the latter to the former of the aforesaid lots;

3. Declaring the retention by the City of Cebu of the eleven (11) lots mentioned in paragraph No. 1 of the compromise agreement, namely, Lot Nos. 1141, 1261, 1268, 1269, 1272, 1273, 917, 646-A, 646A-4-0 and 10107-C;

4. Ordering the City of Cebu or the City Treasurer to turn over to the Province of Cebu the amount of P187948.93 mentioned in Annex "A" of the defendants manifestation dated October 21, 1974;

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5. Declaring the City of Cebu and an its present and past officers completely free from liabilities to third persons in connection with the aforementioned lots, which liabilities if any, shall be assumed by the Province of Cebu;

6. Ordering the Register of Deeds of the City of Cebu to cancel the certification of titles in the name of the City of Cebu covering the lots enumerated in the second paragraph of this order and to issue new ones in lieu thereof in the name of the Province of Cebu.

For services rendered in Civil Case no. 238-BC, CFI of Cebu, respondent Pablo P. Garcia filed through counsel a Notice of Attorney's Lien, dated April 14, 1975, praying that his statement of claim of attorney's lien in said case be entered upon the records thereof, pursuant to Section 37, Rule 138 of the Rules of Court.

To said notice, petitioner Province of Cebu filed through counsel, its opposition dated April 23, 1975, stating that the payment of attorney's fees and reimbursement of incidental expenses are not allowed by law and settled jurisprudence to be paid by the Province. A rejoinder to this opposition was filed by private respondent Garcia.

After hearing, the Court of First Instance of Cebu, then presided over by Judge Alfredo Marigomen, rendered judgment dated May 30, 1979, in favor of private respondent and against petitioner Province of Cebu, declaring that the former is entitled to recover attorney's fees on the basis of quantum meruit and fixing the amount thereof at P30,000.00.

Both parties appealed from the decision to the Court of Appeals. In the case of private respondent, however, he appealed only from that portion of the decision which fixed his attorney's fees at P30,000.00 instead of at 30% of the value of the properties involved in the litigation as stated in his original claim

On October 18, 1985, the Intermediate Appellate Court rendered a decision affirming the findings and conclusions of the trial court that the private respondent is entitled to recover attorney's fees but fixing the amount of such fees at 5% of the market value of the properties involved in the litigation as of the date of the filing of the claim in 1975. The dispositive portion of the decision reads:

WHEREFORE, except for the aforementioned modification that the compensation for the services rendered by the Claimant Atty. Pablo P. Garcia is fixed at five percent (5%) of the total fair market value of the lots in question, the order appealed from is hereby affirmed in all other respects.

Both parties went to the Supreme Court with private respondent questioning the fixing of his attorney's fees at 5% instead of 30% of the value of the properties in litigations as prayed for in his claims. However, the private respondent later withdrew his petition in G.R. No. 72818 with the following explanation:

That after a long and serious reflection and reassessment of his position and intended course of action and, after seeking the views of his friends, petitioner has come to the definite conclusion that prosecuting his appeal would only result in further delay in the final disposition of his claim (it has been pending for the last 10 years 4 in the CFI and 6 in the Court of Appeals, later Intermediate Appellate Court) and that it would be more prudent and practicable to accept in full the decision of the Intermediate Appellate Court.

Hence, only the petition of the Province of Cebu is pending before this Court.

The matter of representation of a municipality by a private attorney has been settled in Ramos v. Court of Appeals (108 SCRA 728). Collaboration of a private law firm with the fiscal and the municipal attorney is not allowed. Section 1683 of the Revised Administrative Code provides:

.Section 1683. Duty of fiscal to represent provinces and provincial subdivisions in litigation. — The provincial fiscal shall represent the province and any municipality, or municipal district thereof in any court, except in cases whereof original jurisdiction is vested in the Supreme Court or in cases where the municipality, or municipal district in question is a party adverse to the provincial government or to some other municipality, or municipal district in the same province. When the interests of a provincial government and of any political division thereof are opposed, the provincial fiscal shall act on behalf of the province.

When the provincial fiscal is disqualified to serve any municipality or other political subdivision of a province, a special attorney may be employed by its council

The above provision, complemented by Section 3 of the Local Autonomy Law, is clear in providing that only the provincial fiscal and the municipal attorney can represent a province or municipality in its lawsuits. The provision is mandatory. The municipality's authority to employ a private lawyer is expressly limited only to situations where the provincial fiscal is disqualified to represent it (De Guia v. The Auditor General 44 SCRA 169; Municipality of Bocaue, et. al. v. Manotok, 93 Phil. 173; Enriquez, Sr., v. Honorable Gimenez, 107 Phil. 932) as when he represents the province against a municipality.

The lawmaker, in requiring that the local government should be represented in its court cases by a government lawyer, like its municipal attorney and the provincial fiscal intended that the local government should not be burdened with the expenses of hiring a private lawyer. The lawmaker also assumed that the interests of the municipal corporation would be best protected if a government lawyer handles its litigations. It is to be expected that the municipal attorney and the fiscal would be faithful and dedicated to the corporation's interests, and that, as civil service employees, they could be held accountable for any misconduct or dereliction of duty (See Ramos v. Court of Appeals, supra).

However, every rule is not without an exception, Ibi quid generaliter conceditur; inest haec exceptio, si non aliquid sit contra jus fasque (Where anything is granted generally, this exception is implied; that nothing shall be contrary to law and right). Indeed, equity, as well as the exceptional situation facing us in the case at bar, require a departure from the established rule.

The petitioner anchors its opposition to private respondent's claim for compensation on the grounds that the employment of claimant as counsel for the Province of Cebu by then Governor Rene Espina was unauthorized and violative of Section 1681 to 1683 in relation to Section

Page 9 of 28

1679 of the Revised Administrative Code and that the claim for attorney's fees is beyond the purview of Section 37, Rule 138 of the Rules of Court.

It is argued that Governor Espina was not authorized by the Provincial Board, through a board resolution, to employ Atty. Pablo P. Garcia as counsel of the Province of Cebu.

Admittedly, this is so.

However, the circumstances obtaining in the case at bar are such that the rule cannot be applied. The Provincial Board would never have given such authorization. The decision of the respondent court elucidates the matter thus:

... The provisions of Sections 1681 to 1683 of the Revised Administrative Code contemplate a normal situation where the adverse party of the province is a third person as in the case of Enriquez v. Auditor General, 107 Phil 932. In the present case, the controversy involved an intramural fight between the Provincial Governor on one hand and the members of the Provincial Board on the other hand. Obviously it is unthinkable for the Provincial Board to adopt a resolution authorizing the Governor to employ Atty. Garcia to act as counsel for the Province of Cebu for the purpose of filing and prosecuting a case against the members to the same Provincial Board According to the claimant Atty. Garcia, how can Governor Espina be expected to secure authority from the Provincial Board to employ claimant as counsel for the Province of Cebu when the very officials from whom authority is to be sought are the same officials to be sued, It is simply impossible that the Vice-Governor and the members of the Provincial Board would pass a resolution authorizing Governor Espina to hire a lawyer to file a suit against themselves.

xxx xxx xxx

Under Section 2102 of the Revised Administrative Code it is the Provincial Board upon whom is vested the authority "to direct, in its discretion, the bringing or defense of civil suits on behalf of the Provincial Governor ___." Considering that the members of the Provincial Board are the very ones involved in this case, they cannot be expected to directed the Provincial Fiscal the filing of the suit on behalf of the provincial government against themselves. Moreover, as argued by the claimant, even if the Provincial Fiscal should side with the Governor in the bringing of this suit, the Provincial Board whose members are made defendants in this case, can simply frustrate his efforts by directing him to dismiss the case or by refusing to appropriate funds for the expenses of the litigation.

... Consequently, there could have been no occasion for the exercise by the Provincial Fiscal of his powers and duties since the members of the Provincial Board would not have directed him to file a suit against them.

A situation obtains, therefore, where the Provincial Governor, in behalf of the Province of Cebu, seeks redress against the very members of the body, that is, the Provincial Board, which, under the law, is to provide it with legal assistance. A strict application of the provisions of the Revise Administrative Code on the matter would deprive the plaintiffs in the court below of redress for a valid grievance. The provincial board authorization required by law to secure the services of special counsel becomes an impossibility. The decision of the respondent court is grounded in equity — a correction applied to law, where on account of the general comprehensiveness of the law, particular exceptions not being provided against, something is wanting to render it perfect.

It is also argued that the employment of claimant was violative of sections 1681 to 1683 of the Revised Administrative Code because the Provincial Fiscal who was the only competent official to file this case was not disqualified to act for the Province of Cebu.

Respondent counsel's representation of the Province of Cebu became necessary because of the Provincial Board's failure or refusal to direct the bringing of the action to recover the properties it had donated to the City of Cebu. The Board more effectively disqualified the Provincial Fiscal from representing the Province of Cebu when it directed the Fiscal to appear for its members in Civil Case No. R-8669 filed by Atty. Garcia, and others, to defend its actuation in passing and approving Provincial Board Resolution No. 186. The answer of the Provincial Fiscal on behalf of the Vice-Governor and the Provincial Board members filed in Civil Case No. R-8669; (Exhibit "K") upholds the validity and legality of the donation. How then could the Provincial Fiscal represent the Province of Cebu in the suit to recover the properties in question? How could Governor Espina be represented by the Provincial Fiscal or seek authorization from the Provincial Board to employ special counsel? Nemo tenetur ad impossibile (The law obliges no one to perform an impossibility).lwphl@itç Neither could a prosecutor be designated by the Department of Justice. Malacañang had already approved the questioned donation

Anent the question of liability for respondent counsel's services, the general rule that an attorney cannot recover his fees from one who did not employ him or authorize his employment, is subject to its own exception.

Until the contrary is clearly shown an attorney is presumed to be acting under authority of the litigant whom he purports to represent (Azotes v. Blanco, 78 Phil. 739) His authority to appear for and represent petitioner in litigation, not having been questioned in the lower court, it will be presumed on appeal that counsel was properly authorized to file the complaint and appear for his client. (Republic v. Philippine Resources Development Corporation, 102 Phil. 960) Even where an attorney is employed by an unauthorized person to represent a client, the latter will be bound where it has knowledge of the fact that it is being represented by an attorney in a particular litigation and takes no prompt measure to repudiate the assumed authority. Such acquiescence in the employment of an attorney as occurred in this case is tantamount to ratification (Tan Lua v. O' Brien, 55 Phil. 53). The act of the successor provincial board and provincial officials in allowing respondent Atty. Pablo P. Garcia to continue as counsel and in joining him in the suit led the counsel to believe his services were still necessary.

We apply a rule in the law of municipal corporations: "that a municipality may become obligated upon an implied contract to pay the reasonable value of the benefits accepted or appropriated by it as to which it has the general power to contract. The doctrine of implied municipal liability has been said to apply to all cases where money or other property of a party is received under such circumstances that the general law, independent of express contract implies an obligation upon the municipality to do justice with respect to the same." (38 Am Jur. Sec. 515, p. 193):

The obligation of a municipal corporation upon the doctrine of an implied contract does not connote an enforceable obligation. Some specific principle or situation of which equity takes cognizance must be the foundation of the claim. The principle of liability rests upon the theory that the obligation implied by law to pay does not originate in the unlawful

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contract, but arises from considerations outside it. The measure of recovery is the benefit received by the municipal corporation. The amount of the loan, the value of the property or services, or the compensation specified in the contract, is not the measure. If the price named in the invalid contract is shown to be entirely fair and reasonable not only in view of the labor done, but also in reference to the benefits conferred, it may be taken as the true measure of recovery.

The petitioner can not set up the plea that the contract was ultra vires and still retain benefits thereunder. Having regarded the contract as valid for purposes of reaping some benefits, the petitioner is estopped to question its validity for the purposes of denying answerability.

The trial court discussed the services of respondent Garcia as follows:

... Thus because of his effort in the filing of this case and in securing the issuance of the injunction preventing the City of Cebu and Sergio Osmeña, Jr., from selling or disposing the lots to third parties, on the part of the members of the Provincial Board from extending the date of the automatic reversion beyond August 15, 1965, on the part of the Register of Deeds — from effecting the transfer of title of any of the donated lots to any vendee or transferee, the disposition of these lots by the City of Cebu to third parties was frustrated and thus: saved these lots for their eventual recovery by the province of Cebu.

Actually it was Governor Espina who filed the case against Cebu City and Mayor Osmeña. Garcia just happened to be the lawyer, Still Atty. Garcia is entitled to compensation. To deny private respondent compensation for his professional services would amount to a deprivation of property without due process of law (Cristobal v. Employees' Compensation Commission, 103 SCRA 329).

The petitioner alleges that although they do not deny Atty. Garcia's services for Governor Espina (who ceased to be such Governor of Cebu on September 13, 1969) and the original plaintiffs in the case, "it cannot be said with candor and fairness that were it not for his services the lots would have already been lost to the province forever, because the donation itself he was trying to enjoin and annul in said case was subject to a reversion clause under which lots remaining undisposed of by the City as of August 15, 1965 automatically reverted to the province and only about 17 lots were disposed of by August 15, 1965." We quote respondent counsel's comment with approval:

xxx xxx xxx

While it is true that the donation was subject to a reversion clause, the same clause gave the Provincial Board the discretion to extend the period of reversion beyond August 15, 1965 (see paragraph 3 of donation).

With the known predisposition of the majority of the members of the Provincial Board, there would have been no impediment to the extension of the reversion date to beyond August 15, 1965. Once the date of reversion is extended, the disposition of an the donated lots would be only a matter of course.

We have carefully reviewed the records of this case and conclude that 30% or even 5% of properties already worth (P120,000,000.00) in 1979 as compensation for the private respondent's services is simply out of the question. The case handled by Atty. Garcia was decided on the basis of a compromise agreement where he no longer participated. The decision was rendered after pre-trial and without any hearing on the merits.

The factual findings and applicable law in this petition are accurately discussed in the exhaustive and well-written Order of then Trial Judge, now Court of Appeals Justice Alfredo Marigomen We agree with his determination of reasonable fees for the private lawyer on the basis of quantum meruit. The trial court fixed the compensation at P30,000.00 and ordered reimbursement of actual expenses in the amount of P289.43.

WHEREFORE, the questioned October 18, 1985 decision of the Intermediate Appellate Court is set aside. The Order of the Trial Court dated May 30, 1979 is REINSTATED.

SO ORDERED.

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G.R. No. 71049 May 29, 1987BERNARDINO JIMENEZ, petitioner, vs. CITY OF MANILA and INTERMEDIATE APPELLATE COURT, respondents.

PARAS, J.:

This is a petition for review on certiorari of: (1) the decision * of the Intermediate Appellate Court in AC-G.R. No. 013887-CV Bernardino Jimenez v. Asiatic Integrated Corporation and City of Manila, reversing the decision ** of the Court of First Instance of Manila, Branch XXII in Civil Case No. 96390 between the same parties, but only insofar as holding Asiatic Integrated Corporation solely liable for damages and attorney's fees instead of making the City of Manila jointly and solidarily liable with it as prayed for by the petitioner and (2) the resolution of the same Appellate Court denying his Partial Motion for Reconsideration (Rollo, p. 2).

The dispositive portion of the Intermediate Appellate Court's decision is as follows:

WHEREFORE, the decision appealed from is hereby REVERSED. A new one is hereby entered ordering the defendant Asiatic Integrated Corporation to pay the plaintiff P221.90 actual medical expenses, P900.00 for the amount paid for the operation and management of a school bus, P20,000.00 as moral damages due to pains, sufferings and sleepless nights and P l0,000.00 as attorney's fees.

SO ORDERED. (p. 20, Rollo)

The findings of respondent Appellate Court are as follows:

The evidence of the plaintiff (petitioner herein) shows that in the morning of August 15, 1974 he, together with his neighbors, went to Sta. Ana public market to buy "bagoong" at the time when the public market was flooded with ankle deep rainwater. After purchasing the "bagoong" he turned around to return home but he stepped on an uncovered opening which could not be seen because of the dirty rainwater, causing a dirty and rusty four- inch nail, stuck inside the uncovered opening, to pierce the left leg of plaintiff-petitioner penetrating to a depth of about one and a half inches. After administering first aid treatment at a nearby drugstore, his companions helped him hobble home. He felt ill and developed fever and he had to be carried to Dr. Juanita Mascardo. Despite the medicine administered to him by the latter, his left leg swelled with great pain. He was then rushed to the Veterans Memorial Hospital where he had to be confined for twenty (20) days due to high fever and severe pain.

Upon his discharge from the hospital, he had to walk around with crutches for fifteen (15) days. His injury prevented him from attending to the school buses he is operating. As a result, he had to engage the services of one Bienvenido Valdez to supervise his business for an aggregate compensation of nine hundred pesos (P900.00). (Decision, AC-G.R. CV No. 01387, Rollo, pp. 13-20).

Petitioner sued for damages the City of Manila and the Asiatic Integrated Corporation under whose administration the Sta. Ana Public Market had been placed by virtue of a Management and Operating Contract (Rollo, p. 47).

The lower court decided in favor of respondents, the dispositive portion of the decision reading:

WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiff dismissing the complaint with costs against the plaintiff. For lack of sufficient evidence, the counterclaims of the defendants are likewise dismissed. (Decision, Civil Case No. 96390, Rollo, p. 42).

As above stated, on appeal, the Intermediate Appellate Court held the Asiatic Integrated Corporation liable for damages but absolved respondent City of Manila.

Hence this petition.

The lone assignment of error raised in this petition is on whether or not the Intermediate Appellate Court erred in not ruling that respondent City of Manila should be jointly and severally liable with Asiatic Integrated Corporation for the injuries petitioner suffered.

In compliance with the resolution of July 1, 1985 of the First Division of this Court (Rollo, p. 29) respondent City of Manila filed its comment on August 13, 1985 (Rollo, p. 34) while petitioner filed its reply on August 21, 1985 (Reno, p. 51).

Thereafter, the Court in the resolution of September 11, 1985 (Rollo, p. 62) gave due course to the petition and required both parties to submit simultaneous memoranda

Petitioner filed his memorandum on October 1, 1985 (Rollo, p. 65) while respondent filed its memorandum on October 24, 1985 (Rollo, p. 82).

In the resolution of October 13, 1986, this case was transferred to the Second Division of this Court, the same having been assigned to a member of said Division (Rollo, p. 92).

The petition is impressed with merit.

As correctly found by the Intermediate Appellate Court, there is no doubt that the plaintiff suffered injuries when he fell into a drainage opening without any cover in the Sta. Ana Public Market. Defendants do not deny that plaintiff was in fact injured although the Asiatic Integrated Corporation tries to minimize the extent of the injuries, claiming that it was only a small puncture and that as a war veteran, plaintiff's hospitalization at the War Veteran's Hospital was free. (Decision, AC-G.R. CV No. 01387, Rollo, p. 6).

Respondent City of Manila maintains that it cannot be held liable for the injuries sustained by the petitioner because under the Management and Operating Contract, Asiatic Integrated Corporation assumed all responsibility for damages which may be suffered by third persons for any cause attributable to it.

Page 12 of 28

It has also been argued that the City of Manila cannot be held liable under Article 1, Section 4 of Republic Act No. 409 as amended (Revised Charter of Manila) which provides:

The City shall not be liable or held for damages or injuries to persons or property arising from the failure of the Mayor, the Municipal Board, or any other City Officer, to enforce the provisions of this chapter, or any other law or ordinance, or from negligence of said Mayor, Municipal Board, or any other officers while enforcing or attempting to enforce said provisions.

This issue has been laid to rest in the case of City of Manila v. Teotico (22 SCRA 269-272 [1968]) where the Supreme Court squarely ruled that Republic Act No. 409 establishes a general rule regulating the liability of the City of Manila for "damages or injury to persons or property arising from the failure of city officers" to enforce the provisions of said Act, "or any other law or ordinance or from negligence" of the City "Mayor, Municipal Board, or other officers while enforcing or attempting to enforce said provisions."

Upon the other hand, Article 2189 of the Civil Code of the Philippines which provides that:

Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by any person by reason of defective conditions of roads, streets, bridges, public buildings and other public works under their control or supervision.

constitutes a particular prescription making "provinces, cities and municipalities ... liable for damages for the death of, or injury suffered by any person by reason" — specifically — "of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision." In other words, Art. 1, sec. 4, R.A. No. 409 refers to liability arising from negligence, in general, regardless of the object, thereof, while Article 2189 of the Civil Code governs liability due to "defective streets, public buildings and other public works" in particular and is therefore decisive on this specific case.

In the same suit, the Supreme Court clarified further that under Article 2189 of the Civil Code, it is not necessary for the liability therein established to attach, that the defective public works belong to the province, city or municipality from which responsibility is exacted. What said article requires is that the province, city or municipality has either "control or supervision" over the public building in question.

In the case at bar, there is no question that the Sta. Ana Public Market, despite the Management and Operating Contract between respondent City and Asiatic Integrated Corporation remained under the control of the former.

For one thing, said contract is explicit in this regard, when it provides:

II

That immediately after the execution of this contract, the SECOND PARTY shall start the painting, cleaning, sanitizing and repair of the public markets and talipapas and within ninety (90) days thereof, the SECOND PARTY shall submit a program of improvement, development, rehabilitation and reconstruction of the city public markets and talipapas subject to prior approval of the FIRST PARTY. (Rollo, p. 44)

xxx xxx xxx

VI

That all present personnel of the City public markets and talipapas shall be retained by the SECOND PARTY as long as their services remain satisfactory and they shall be extended the same rights and privileges as heretofore enjoyed by them. Provided, however, that the SECOND PARTY shall have the right, subject to prior approval of the FIRST PARTY to discharge any of the present employees for cause. (Rollo, p. 45).

VII

That the SECOND PARTY may from time to time be required by the FIRST PARTY, or his duly authorized representative or representatives, to report, on the activities and operation of the City public markets and talipapas and the facilities and conveniences installed therein, particularly as to their cost of construction, operation and maintenance in connection with the stipulations contained in this Contract. (lbid)

The fact of supervision and control of the City over subject public market was admitted by Mayor Ramon Bagatsing in his letter to Secretary of Finance Cesar Virata which reads:

These cases arose from the controversy over the Management and Operating Contract entered into on December 28, 1972 by and between the City of Manila and the Asiatic Integrated Corporation, whereby in consideration of a fixed service fee, the City hired the services of the said corporation to undertake the physical management, maintenance, rehabilitation and development of the City's public markets and' Talipapas' subject to the control and supervision of the City.

xxx xxx xxx

It is believed that there is nothing incongruous in the exercise of these powers vis-a-vis the existence of the contract, inasmuch as the City retains the power of supervision and control over its public markets and talipapas under the terms of the contract. (Exhibit "7-A") (Emphasis supplied.) (Rollo, p. 75).

In fact, the City of Manila employed a market master for the Sta. Ana Public Market whose primary duty is to take direct supervision and control of that particular market, more specifically, to check the safety of the place for the public.

Thus the Asst. Chief of the Market Division and Deputy Market Administrator of the City of Manila testified as follows:

Page 13 of 28

Court This market master is an employee of the City of Manila?

Mr. Ymson Yes, Your Honor.

Q What are his functions?

A Direct supervision and control over the market area assigned to him."(T.s.n.,pp. 41-42, Hearing of May 20, 1977.)

xxx xxx xxx

Court As far as you know there is or is there any specific employee assigned with the task of seeing to it that the Sta. Ana Market is safe for the public?

Mr. Ymson Actually, as I stated, Your Honor, that the Sta. Ana has its own market master. The primary duty of that market master is to make the direct supervision and control of that particular market, the check or verifying whether the place is safe for public safety is vested in the market master. (T.s.n., pp. 2425, Hearing of July 27, 1977.) (Emphasis supplied.) (Rollo, p. 76).

Finally, Section 30 (g) of the Local Tax Code as amended, provides:

The treasurer shall exercise direct and immediate supervision administration and control over public markets and the personnel thereof, including those whose duties concern the maintenance and upkeep of the market and ordinances and other pertinent rules and regulations. (Emphasis supplied.) (Rollo, p. 76)

The contention of respondent City of Manila that petitioner should not have ventured to go to Sta. Ana Public Market during a stormy weather is indeed untenable. As observed by respondent Court of Appeals, it is an error for the trial court to attribute the negligence to herein petitioner. More specifically stated, the findings of appellate court are as follows:

... The trial court even chastised the plaintiff for going to market on a rainy day just to buy bagoong. A customer in a store has the right to assume that the owner will comply with his duty to keep the premises safe for customers. If he ventures to the store on the basis of such assumption and is injured because the owner did not comply with his duty, no negligence can be imputed to the customer. (Decision, AC-G. R. CV No. 01387, Rollo, p. 19).

As a defense against liability on the basis of a quasi-delict, one must have exercised the diligence of a good father of a family. (Art. 1173 of the Civil Code).

There is no argument that it is the duty of the City of Manila to exercise reasonable care to keep the public market reasonably safe for people frequenting the place for their marketing needs.

While it may be conceded that the fulfillment of such duties is extremely difficult during storms and floods, it must however, be admitted that ordinary precautions could have been taken during good weather to minimize the dangers to life and limb under those difficult circumstances.

For instance, the drainage hole could have been placed under the stalls instead of on the passage ways. Even more important is the fact, that the City should have seen to it that the openings were covered. Sadly, the evidence indicates that long before petitioner fell into the opening, it was already uncovered, and five (5) months after the incident happened, the opening was still uncovered. (Rollo, pp. 57; 59). Moreover, while there are findings that during floods the vendors remove the iron grills to hasten the flow of water (Decision, AC-G.R. CV No. 0 1387; Rollo, p. 17), there is no showing that such practice has ever been prohibited, much less penalized by the City of Manila. Neither was it shown that any sign had been placed thereabouts to warn passersby of the impending danger.

To recapitulate, it appears evident that the City of Manila is likewise liable for damages under Article 2189 of the Civil Code, respondent City having retained control and supervision over the Sta. Ana Public Market and as tort-feasor under Article 2176 of the Civil Code on quasi-delicts

Petitioner had the right to assume that there were no openings in the middle of the passageways and if any, that they were adequately covered. Had the opening been covered, petitioner could not have fallen into it. Thus the negligence of the City of Manila is the proximate cause of the injury suffered, the City is therefore liable for the injury suffered by the peti- 4 petitioner.

Respondent City of Manila and Asiatic Integrated Corporation being joint tort-feasors are solidarily liable under Article 2194 of the Civil Code.

PREMISES CONSIDERED, the decision of the Court of Appeals is hereby MODIFIED, making the City of Manila and the Asiatic Integrated Corporation solidarily liable to pay the plaintiff P221.90 actual medical expenses, P900.00 for the amount paid for the operation and management of the school bus, P20,000.00 as moral damages due to pain, sufferings and sleepless nights and P10,000.00 as attorney's fees.

SO ORDERED.

Page 14 of 28

G.R. No. L-52179 April 8, 1991MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner

vs.HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIÑA, IAUREANO BANIÑA, JR., SOR MARIETA BANIÑA, MONTANO BANIÑA, ORJA

BANIÑA, AND LYDIA R. BANIÑA, respondents.

MEDIALDEA, J.:

This is a petition for certiorari with prayer for the issuance of a writ of preliminary mandatory injunction seeking the nullification or modification of the proceedings and the orders issued by the respondent Judge Romeo N. Firme, in his capacity as the presiding judge of the Court of First Instance of La Union, Second Judicial District, Branch IV, Bauang, La Union in Civil Case No. 107-BG, entitled "Juana Rimando Baniña, et al. vs. Macario Nieveras, et al." dated November 4, 1975; July 13, 1976; August 23,1976; February 23, 1977; March 16, 1977; July 26, 1979; September 7, 1979; November 7, 1979 and December 3, 1979 and the decision dated October 10, 1979 ordering defendants Municipality of San Fernando, La Union and Alfredo Bislig to pay, jointly and severally, the plaintiffs for funeral expenses, actual damages consisting of the loss of earning capacity of the deceased, attorney's fees and costs of suit and dismissing the complaint against the Estate of Macario Nieveras and Bernardo Balagot.

The antecedent facts are as follows:

Petitioner Municipality of San Fernando, La Union is a municipal corporation existing under and in accordance with the laws of the Republic of the Philippines. Respondent Honorable Judge Romeo N. Firme is impleaded in his official capacity as the presiding judge of the Court of First Instance of La Union, Branch IV, Bauang, La Union. While private respondents Juana Rimando-Baniña, Laureano Baniña, Jr., Sor Marietta Baniña, Montano Baniña, Orja Baniña and Lydia R. Baniña are heirs of the deceased Laureano Baniña Sr. and plaintiffs in Civil Case No. 107-Bg before the aforesaid court.

At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a passenger jeepney driven by Bernardo Balagot and owned by the Estate of Macario Nieveras, a gravel and sand truck driven by Jose Manandeg and owned by Tanquilino Velasquez and a dump truck of the Municipality of San Fernando, La Union and driven by Alfredo Bislig. Due to the impact, several passengers of the jeepney including Laureano Baniña Sr. died as a result of the injuries they sustained and four (4) others suffered varying degrees of physical injuries.

On December 11, 1966, the private respondents instituted a compliant for damages against the Estate of Macario Nieveras and Bernardo Balagot, owner and driver, respectively, of the passenger jeepney, which was docketed Civil Case No. 2183 in the Court of First Instance of La Union, Branch I, San Fernando, La Union. However, the aforesaid defendants filed a Third Party Complaint against the petitioner and the driver of a dump truck of petitioner.

Thereafter, the case was subsequently transferred to Branch IV, presided over by respondent judge and was subsequently docketed as Civil Case No. 107-Bg. By virtue of a court order dated May 7, 1975, the private respondents amended the complaint wherein the petitioner and its regular employee, Alfredo Bislig were impleaded for the first time as defendants. Petitioner filed its answer and raised affirmative defenses such as lack of cause of action, non-suability of the State, prescription of cause of action and the negligence of the owner and driver of the passenger jeepney as the proximate cause of the collision.

In the course of the proceedings, the respondent judge issued the following questioned orders, to wit:

(1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo Balagot;

(2) Order dated July 13, 1976 admitting the Amended Answer of the Municipality of San Fernando, La Union and Bislig and setting the hearing on the affirmative defenses only with respect to the supposed lack of jurisdiction;

(3) Order dated August 23, 1976 deferring there resolution of the grounds for the Motion to Dismiss until the trial;

(4) Order dated February 23, 1977 denying the motion for reconsideration of the order of July 13, 1976 filed by the Municipality and Bislig for having been filed out of time;

(5) Order dated March 16, 1977 reiterating the denial of the motion for reconsideration of the order of July 13, 1976;

(6) Order dated July 26, 1979 declaring the case deemed submitted for decision it appearing that parties have not yet submitted their respective memoranda despite the court's direction; and

(7) Order dated September 7, 1979 denying the petitioner's motion for reconsideration and/or order to recall prosecution witnesses for cross examination.

On October 10, 1979 the trial court rendered a decision, the dispositive portion is hereunder quoted as follows:

IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for the plaintiffs, and defendants Municipality of San Fernando, La Union and Alfredo Bislig are ordered to pay jointly and severally, plaintiffs Juana Rimando-Baniña, Mrs. Priscilla B. Surell, Laureano Baniña Jr., Sor Marietta Baniña, Mrs. Fe B. Soriano, Montano Baniña, Orja Baniña and Lydia B. Baniña the sums of P1,500.00 as funeral expenses and P24,744.24 as the lost expected earnings of the late Laureano Baniña Sr., P30,000.00 as moral damages, and P2,500.00 as attorney's fees. Costs against said defendants.

The Complaint is dismissed as to defendants Estate of Macario Nieveras and Bernardo Balagot.

SO ORDERED. (Rollo, p. 30)

Page 15 of 28

Petitioner filed a motion for reconsideration and for a new trial without prejudice to another motion which was then pending. However, respondent judge issued another order dated November 7, 1979 denying the motion for reconsideration of the order of September 7, 1979 for having been filed out of time.

Finally, the respondent judge issued an order dated December 3, 1979 providing that if defendants municipality and Bislig further wish to pursue the matter disposed of in the order of July 26, 1979, such should be elevated to a higher court in accordance with the Rules of Court. Hence, this petition.

Petitioner maintains that the respondent judge committed grave abuse of discretion amounting to excess of jurisdiction in issuing the aforesaid orders and in rendering a decision. Furthermore, petitioner asserts that while appeal of the decision maybe available, the same is not the speedy and adequate remedy in the ordinary course of law.

On the other hand, private respondents controvert the position of the petitioner and allege that the petition is devoid of merit, utterly lacking the good faith which is indispensable in a petition for certiorari and prohibition. (Rollo, p. 42.) In addition, the private respondents stress that petitioner has not considered that every court, including respondent court, has the inherent power to amend and control its process and orders so as to make them conformable to law and justice. (Rollo, p. 43.)

The controversy boils down to the main issue of whether or not the respondent court committed grave abuse of discretion when it deferred and failed to resolve the defense of non-suability of the State amounting to lack of jurisdiction in a motion to dismiss.

In the case at bar, the respondent judge deferred the resolution of the defense of non-suability of the State amounting to lack of jurisdiction until trial. However, said respondent judge failed to resolve such defense, proceeded with the trial and thereafter rendered a decision against the municipality and its driver.

The respondent judge did not commit grave abuse of discretion when in the exercise of its judgment it arbitrarily failed to resolve the vital issue of non-suability of the State in the guise of the municipality. However, said judge acted in excess of his jurisdiction when in his decision dated October 10, 1979 he held the municipality liable for the quasi-delict committed by its regular employee.

The doctrine of non-suability of the State is expressly provided for in Article XVI, Section 3 of the Constitution, to wit: "the State may not be sued without its consent."

Stated in simple parlance, the general rule is that the State may not be sued except when it gives consent to be sued. Consent takes the form of express or implied consent.

Express consent may be embodied in a general law or a special law. The standing consent of the State to be sued in case of money claims involving liability arising from contracts is found in Act No. 3083. A special law may be passed to enable a person to sue the government for an alleged quasi-delict, as in Merritt v. Government of the Philippine Islands (34 Phil 311). (see United States of America v. Guinto, G.R. No. 76607, February 26, 1990, 182 SCRA 644, 654.)

Consent is implied when the government enters into business contracts, thereby descending to the level of the other contracting party, and also when the State files a complaint, thus opening itself to a counterclaim. (Ibid)

Municipal corporations, for example, like provinces and cities, are agencies of the State when they are engaged in governmental functions and therefore should enjoy the sovereign immunity from suit. Nevertheless, they are subject to suit even in the performance of such functions because their charter provided that they can sue and be sued. (Cruz, Philippine Political Law, 1987 Edition, p. 39)

A distinction should first be made between suability and liability. "Suability depends on the consent of the state to be sued, liability on the applicable law and the established facts. The circumstance that a state is suable does not necessarily mean that it is liable; on the other hand, it can never be held liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the state has allowed itself to be sued. When the state does waive its sovereign immunity, it is only giving the plaintiff the chance to prove, if it can, that the defendant is liable." (United States of America vs. Guinto, supra, p. 659-660)

Anent the issue of whether or not the municipality is liable for the torts committed by its employee, the test of liability of the municipality depends on whether or not the driver, acting in behalf of the municipality, is performing governmental or proprietary functions. As emphasized in the case of Torio vs. Fontanilla (G. R. No. L-29993, October 23, 1978. 85 SCRA 599, 606), the distinction of powers becomes important for purposes of determining the liability of the municipality for the acts of its agents which result in an injury to third persons.

Another statement of the test is given in City of Kokomo vs. Loy, decided by the Supreme Court of Indiana in 1916, thus:

Municipal corporations exist in a dual capacity, and their functions are twofold. In one they exercise the right springing from sovereignty, and while in the performance of the duties pertaining thereto, their acts are political and governmental. Their officers and agents in such capacity, though elected or appointed by them, are nevertheless public functionaries performing a public service, and as such they are officers, agents, and servants of the state. In the other capacity the municipalities exercise a private, proprietary or corporate right, arising from their existence as legal persons and not as public agencies. Their officers and agents in the performance of such functions act in behalf of the municipalities in their corporate or individual capacity, and not for the state or sovereign power." (112 N.E., 994-995) (Ibid, pp. 605-606.)

It has already been remarked that municipal corporations are suable because their charters grant them the competence to sue and be sued. Nevertheless, they are generally not liable for torts committed by them in the discharge of governmental functions and can be held answerable only if it can be shown that they were acting in a proprietary capacity. In permitting such entities to be sued, the State merely gives the claimant the right to show that the defendant was not acting in its governmental capacity when the injury was committed or that the case comes under the exceptions recognized by law. Failing this, the claimant cannot recover. (Cruz, supra, p. 44.)

In the case at bar, the driver of the dump truck of the municipality insists that "he was on his way to the Naguilian river to get a load of sand and gravel for the repair of San Fernando's municipal streets." (Rollo, p. 29.)

Page 16 of 28

In the absence of any evidence to the contrary, the regularity of the performance of official duty is presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule that the driver of the dump truck was performing duties or tasks pertaining to his office.

We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte, the District Engineer, and the Provincial Treasurer (102 Phil 1186) that "the construction or maintenance of roads in which the truck and the driver worked at the time of the accident are admittedly governmental activities."

After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that the municipality cannot be held liable for the torts committed by its regular employee, who was then engaged in the discharge of governmental functions. Hence, the death of the passenger –– tragic and deplorable though it may be –– imposed on the municipality no duty to pay monetary compensation.

All premises considered, the Court is convinced that the respondent judge's dereliction in failing to resolve the issue of non-suability did not amount to grave abuse of discretion. But said judge exceeded his jurisdiction when it ruled on the issue of liability.

ACCORDINGLY, the petition is GRANTED and the decision of the respondent court is hereby modified, absolving the petitioner municipality of any liability in favor of private respondents.

SO ORDERED.

Page 17 of 28

G.R. No. 107271 September 10, 2003CITY OF CALOOCAN and NORMA M. ABRACIA, petitioners,

vs.HON. MAURO T. ALLARDE, Presiding Judge of Branch 123, RTC of Caloocan City, ALBERTO A. CASTILLO, Deputy Sheriff of Branch 123, RTC of

Caloocan City, and DELFINA HERNANDEZ SANTIAGO and PHILIPPINE NATIONAL BANK (PNB), respondents.

CORONA, J.:

Assailed in this petition for certiorari is the decision1 dated August 31, 1992, of the Court of Appeals in CA G.R. SP No. 27423, ordering the Regional Trial Court of Caloocan City, Branch 123, to implement an alias writ of execution dated January 16, 1992. The dispositive portion read as follows:

WHEREFORE the petition is hereby granted ordering the Regional Trial Court of Kaloocan City, Branch 123, to immediately effect the alias writ of execution dated January 16, 1992 without further delay.

Counsel for the respondents are warned that a repetition of their contemptuous act to delay the execution of a final and executory judgment will be dealt with more severely.

SO ORDERED.2

It is important to state at the outset that the dispute between petitioner and private respondent has been litigated thrice before this Court: first, in G.R. No. L-39288-89, entitled Heirs of Abelardo Palomique, et al. vs. Marcial Samson, et al., decided on January 31, 1985; second, in G.R. No. 98366, entitled City Government of Caloocan vs. Court of Appeals, et al., resolved on May 16, 1991, and third, in G.R. No. 102625, entitled Santiago vs. Sto. Tomas, et al., decided on August 1, 1995. This is not to mention the numerous concurrent efforts by the City Government of Caloocan to seek relief from other judicial and quasi-judicial bodies. The present petition for certiorari is the fourth time we are called upon to resolve the dispute.

The factual and procedural antecedents follow.

Sometime in 1972, Marcial Samson, City Mayor of Caloocan City, through Ordinance No. 1749, abolished the position of Assistant City Administrator and 17 other positions from the plantilla of the local government of Caloocan. Then Assistant City Administrator Delfina Hernandez Santiago and the 17 affected employees of the City Government assailed the legality of the abolition before the then Court of First Instance (CFI) of Caloocan City, Branch 33.

In 1973, the CFI declared the abolition illegal and ordered the reinstatement of all the dismissed employees and the payment of their back salaries and other emoluments. The City Government of Caloocan appealed to the Court of Appeals. Respondent Santiago and her co-parties moved for the dismissal of the appeal for being dilatory and frivolous but the appellate court denied their motion. Thus, they elevated the case on certiorari before this Court, docketed as G.R. No. L-39288-89, Heirs of Abelardo Palomique, et al. vs. Marcial Samson, et al. In our Resolution dated January 31, 1985, we held that the appellate court "erred in not dismissing the appeal," and "that the appeal of the City Government of Caloocan was frivolous and dilatory." In due time, the resolution lapsed into finality and entry of judgment was made on February 27, 1985.

In 1986, the City Government of Caloocan paid respondent Santiago P75,083.37 in partial payment of her backwages, thereby leaving a balance of P530,761.91. Her co-parties were paid in full.3 In 1987, the City of Caloocan appropriated funds for her unpaid back salaries. This was included in Supplemental Budget No. 3 for the fiscal year 1987. Surprisingly, however, the City later refused to release the money to respondent Santiago.

Respondent Santiago exerted effort for the execution of the remainder of the money judgment but she met stiff opposition from the City Government of Caloocan. On February 12, 1991, Judge Mauro T. Allarde, RTC of Caloocan City, Branch 123, issued a writ of execution for the payment of the remainder of respondent Santiago’s back salaries and other emoluments.4

For the second time, the City Government of Caloocan went up to the Court of Appeals and filed a petition for certiorari, prohibition and injunction to stop the trial court from enforcing the writ of execution. The CA dismissed the petition and affirmed the order of issuance of the writ of execution.5 One of the issues raised and resolved therein was the extent to which back salaries and emoluments were due to respondent Santiago. The appellate court held that she was entitled to her salaries from October, 1983 to December, 1986.

And for the second time, the City Government of Caloocan appealed to this Court in G.R. No. 98366, City Government of Caloocan vs. Court of Appeals, et al. The petition was dismissed, through our Resolution of May 16, 1991, for having been filed late and for failure to show any reversible error on the part of the Court of Appeals. The resolution subsequently attained finality and the corresponding entry of judgment was made on July 29, 1991.

On motion of private respondent Santiago, Judge Mauro T. Allarde ordered the issuance of an alias writ of execution on March 3, 1992. The City Government of Caloocan moved to reconsider the order, insisting in the main that respondent Santiago was not entitled to backwages from 1983 to 1986. The court a quo denied the motion and forthwith issued the alias writ of execution. Unfazed, the City Government of Caloocan filed a motion to quash the writ, maintaining that the money judgment sought to be enforced should not have included salaries and allowances for the years 1983-1986. The trial court likewise denied the motion.

On July 27, 1992, Sheriff Alberto A. Castillo levied and sold at public auction one of the motor vehicles of the City Government of Caloocan, with plate no. SBH-165, for P100,000. The proceeds of the sale were turned over to respondent Santiago in partial satisfaction of her claim, thereby leaving a balance of P439,377.14, inclusive of interest. Petitioners filed a motion questioning the validity of the auction sale of the vehicle with plate no. SBH-165, and a supplemental motion maintaining that the properties of the municipality were exempt from execution. In his Order dated October 1, 1992, Judge Allarde denied both motions and directed the sheriff to levy and schedule at public auction three more vehicles of the City of Caloocan -6</p>

ONE (1) Unit Motor Vehicle (Hunter Station Wagon); Motor No. C-240-199629; Chassis No. MBB-910369C;

Page 18 of 28

ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel); Engine No. 4FB1-174328, Chassis No. MBB-910345C; Plate No. SDL-653;

ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel); Engine No. 4FB-165196; Chassis No. MBB 910349C.

All the vehicles, including that previously sold in the auction sale, were owned by the City and assigned for the use of herein petitioner Norma Abracia, Division Superintendent of Caloocan City, and other officials of the Division of City Schools.

Meanwhile, the City Government of Caloocan sought clarification from the Civil Service Commission (CSC) on whether respondent Santiago was considered to have rendered services from 1983-1986 as to be entitled to backwages for that period. In its Resolution No. 91-1124, the CSC ruled in the negative.

On November 22, 1991, private respondent Santiago challenged the CSC resolution before this Court in G.R. No. 102625, Santiago vs. Sto. Tomas, et al. On July 8, 1993, we initially dismissed the petition for lack of merit; however, we reconsidered the dismissal of the petition in our Resolution dated August 1, 1995, this time ruling in favor of respondent Santiago:

The issue of petitioner Santiago’s right to back salaries for the period from October 1983 to December 1986 having been resolved in G.R. No. 98366 on 16 May 1991, CSC Resolution No. 91-1124 promulgated later on 24 September 1991 – in particular, its ruling on the extent of backwages due petitioner Santiago – was in fact moot and academic at the time of its promulgation. CSC Resolution No. 91-1124 could not, of course, set aside what had been judicially decided with finality x x x x the court considers that resort by the City Government of Caloocan to respondent CSC was but another attempt to deprive petitioner Santiago of her claim to back salaries x x x and a continuation of the City’s abuse and misuse of the rules of judicial procedure. The City’s acts have resulted in wasting the precious time and resources of the courts and respondent CSC. (Underscoring supplied).

On October 5, 1992, the City Council of Caloocan passed Ordinance No. 0134, Series of 1992, which included the amount of P439,377.14 claimed by respondent Santiago as back salaries, plus interest.7 Pursuant to the subject ordinance, Judge Allarde issued an order dated November 10, 1992, decreeing that:

WHEREFORE, the City Treasurer (of Caloocan), Norberto Azarcon is hereby ordered to deliver to this Court within five (5) days from receipt hereof, (a) manager’s check covering the amount of P439,378.00 representing the back salaries of petitioner Delfina H. Santiago in accordance with Ordinance No. 0134 S. 1992 and pursuant to the final and executory decision in these cases.

Then Caloocan Mayor Macario A. Asistio, Jr., however, refused to sign the check intended as payment for respondent Santiago’s claims. This, despite the fact that he was one of the signatories of the ordinance authorizing such payment. On April 29, 1993, Judge Allarde issued another order directing the Acting City Mayor of Caloocan, Reynaldo O. Malonzo, to sign the check which had been pending before the Office of the Mayor since December 11, 1992. Acting City Mayor Malonzo informed the trial court that "he could not comply with the order since the subject check was not formally turned over to him by the City Mayor" who went on official leave of absence on April 15, 1993, and that "he doubted whether he had authority to sign the same."8

Thus, in an order dated May 7, 1993, Judge Allarde ordered Sheriff Alberto A. Castillo to immediately garnish the funds of the City Government of Caloocan corresponding to the claim of respondent Santiago.9 On the same day, Sheriff Alberto A. Castillo served a copy of the Notice of Garnishment on the Philippine National Bank (PNB), Sangandaan Branch, Caloocan City. When PNB immediately notified the City of Caloocan of the Notice of Garnishment, the City Treasurer sent a letter-advice informing PNB that the order of garnishment was "illegal," with a warning that it would hold PNB liable for any damages which may be caused by the withholding of the funds of the city. PNB opted to comply with the order of Judge Allarde and released to the Sheriff a manager’s check amounting to P439,378. After 21 long years, the claim of private respondent Santiago was finally settled in full.

On June 4, 1993, however, while the instant petition was pending, the City Government of Caloocan filed yet another motion with this Court, a Motion to Declare in Contempt of Court; to Set Aside the Garnishment and Administrative Complaint against Judge Allarde, respondent Santiago and PNB. Subsequently, the City Government of Caloocan filed a Supplemental Petition formally impleading PNB as a party-respondent in this case.

The instant petition for certiorari is directed this time against the validity of the garnishment of the funds of the City of Caloocan, as well as the validity of the levy and sale of the motor vehicles belonging to the City of Caloocan. More specifically, petitioners insist that Judge Allarde gravely abused his discretion in:

(a) ordering the garnishment of the funds of the City of Caloocan deposited with the PNB, since it is settled that public funds are beyond the reach of garnishment and even with the appropriation passed by the City Council, the authority of the Mayor is still needed for the release of the appropriation;

(b) ordering the levy and sale at public auction of three (3) motor vehicles owned by the City of Caloocan, which vehicles are necessary for public use and cannot be attached nor sold in an execution sale to satisfy a money judgment against the City of Caloocan;

(c) peremptorily denying petitioner City of Caloocan’s urgent motions to vacate and set aside the auction sale of the motor vehicle with PLATE NO. SBH-165, notwithstanding that the auction sale by the Sheriff was tainted with serious irregularities, more particularly:

i. non-compliance with the mandatory posting of the notice of sale;

ii. non-observance of the procedure that a sale through public auction has to be made and consummated at the time of the auction, at the designated place and upon actual payment of the purchase price by the winning bidder;

iii. violation of Sec. 21, Rule 39 of the Rules of Court to the effect that sale of personal property capable of manual delivery ‘must be sold within the view of those attending the sale;’ and,

iv. the Sheriff’s Certificate of Sale contained false narration of facts respecting the actual time of the public auction; Page 19 of 28

(d) the enforcement of the levy made by the Sheriff covering the three (3) motor vehicles based on an alias writ that has long expired.

The petition has absolutely no merit. The trial court committed no grave abuse of discretion in implementing the alias writ of execution to settle the claim of respondent Santiago, the satisfaction of which petitioner had been maliciously evading for 21 years.

Petitioner argues that the garnishment of its funds in PNB was invalid inasmuch as these were public funds and thus exempt from execution. Garnishment is considered a specie of attachment by means of which the plaintiff seeks to subject to his claim property of the defendant in the hands of a third person, or money owed by such third person or garnishee to the defendant.10

The rule is and has always been that all government funds deposited in the PNB or any other official depositary of the Philippine Government by any of its agencies or instrumentalities, whether by general or special deposit, remain government funds and may not be subject to garnishment or levy, in the absence of a corresponding appropriation as required by law:11

Even though the rule as to immunity of a state from suit is relaxed, the power of the courts ends when the judgment is rendered. Although the liability of the state has been judicially ascertained, the state is at liberty to determine for itself whether to pay the judgment or not, and execution cannot issue on a judgment against the state. Such statutes do not authorize a seizure of state property to satisfy judgments recovered, and only convey an implication that the legislature will recognize such judgment as final and make provision for the satisfaction thereof.12

The rule is based on obvious considerations of public policy. The functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by law.13

However, the rule is not absolute and admits of a well-defined exception, that is, when there is a corresponding appropriation as required by law. Otherwise stated, the rule on the immunity of public funds from seizure or garnishment does not apply where the funds sought to be levied under execution are already allocated by law specifically for the satisfaction of the money judgment against the government. In such a case, the monetary judgment may be legally enforced by judicial processes.

Thus, in the similar case of Pasay City Government, et al. vs. CFI of Manila, Br. X, et al.,14 where petitioners challenged the trial court’s order garnishing its funds in payment of the contract price for the construction of the City Hall, we ruled that, while government funds deposited in the PNB are exempt from execution or garnishment, this rule does not apply if an ordinance has already been enacted for the payment of the City’s obligations –

Upon the issuance of the writ of execution, the petitioner-appellants moved for its quashal alleging among other things the exemption of the government from execution. This move on the part of petitioner-appellants is at first glance laudable for ‘all government funds deposited with the Philippine National Bank by any agency or instrumentality of the government, whether by way of general or special deposit, remain government funds and may not be subject to garnishment or levy.’ But inasmuch as an ordinance has already been enacted expressly appropriating the amount of P613,096.00 as payment to the respondent-appellee, then the herein case is covered by the exception to the general rule x x x x

In the instant case, the City Council of Caloocan already approved and passed Ordinance No. 0134, Series of 1992, allocating the amount of P439,377.14 for respondent Santiago’s back salaries plus interest. Thus this case fell squarely within the exception. For all intents and purposes, Ordinance No. 0134, Series of 1992, was the "corresponding appropriation as required by law." The sum indicated in the ordinance for Santiago were deemed automatically segregated from the other budgetary allocations of the City of Caloocan and earmarked solely for the City’s monetary obligation to her. The judgment of the trial court could then be validly enforced against such funds.

Indeed, this conclusion is further buttressed by the Certification issued on December 23, 1992 by Norberto C. Azarcon, City Treasurer of Caloocan:

CERTIFICATION

This is to certify that according to the records available in this Office the claim for backwages of the HON. JUDGE DELFINA H. SANTIAGO has been properly obligated and can be collected in accordance with existing accounting and auditing rules and regulations.

This is to certify further that in case the claim is not collected within the present fiscal year, such claim shall be entered in the books of Accounts Payable and can still be collected in the next fiscal year x x x x (Underscoring supplied)

Petitioners’ reliance on Municipality of Makati vs. Court of Appeals, et al.,15 and Commissioner of Public Highways vs. San Diego,16 does not help their cause.17 Both cases implicitly affirmed that public funds may be garnished if there is a statute which appropriated the amount so garnished. Thus, in Municipality of Makati, citing San Diego, we unequivocally held that:

In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless otherwise provided by statute x x x x

Similarly, we cannot agree with petitioner’s argument that the appropriation ordinance of the City Council did not authorize PNB to release the funds because only the City Mayor could authorize the release thereof. A valid appropriation of public funds lifts its exemption from execution. Here, the appropriation passed by the City Council of Caloocan providing for the payment of backwages to respondent was duly approved and signed by both the council and then Mayor Macario Asistio, Jr. The mayor’s signature approving the budget ordinance was his assent to the appropriation of funds for respondent Santiago’s backwages. If he did not agree with such allocation, he could have vetoed the item pursuant to Section 55 of the Local Government Code.18 There was no such veto.

In view of the foregoing discourse, we dismiss petitioners’ unfounded assertion, probably made more out of sheer ignorance of prevailing jurisprudence than a deliberate attempt to mislead us, that the rule that "public funds (are) beyond the reach of levy and garnishment is not qualified by any condition."19

Page 20 of 28

We now come to the issue of the legality of the levy on the three motor vehicles belonging to the City of Caloocan which petitioners claimed to be exempt from execution, and which levy was based on an alias writ that had purportedly expired. Suffice it to say that Judge Allarde, in his Order dated November 10, 1992,20 already lifted the levy on the three vehicles, thereby formally discharging them from the jurisdiction of the court and turning them over to the City Government of Caloocan:

x x x x the levy of the three (3) vehicles made by Sheriff Alberto Castillo pursuant to the Orders of this Court dated October 1 and 8, 1992 is hereby lifted and the said Sheriff is hereby ordered to return the same to the City Government in view of the satisfaction of the decision in these cases x x x x

It is thus unnecessary for us to discuss a moot issue.

We turn to the third issue raised by petitioners that the auction sale by Sheriff Alberto A. Castillo of the motor vehicle with plate no. SBH-165 was tainted with serious irregularities. We need not emphasize that the sheriff enjoys the presumption of regularity in the performance of the functions of his office. This presumption prevails in the absence of substantial evidence to the contrary and cannot be overcome by bare and self-serving allegations. The petitioners failed to convince us that the auction sale conducted by the sheriff indeed suffered from fatal flaws. No evidence was adduced to prove that the sheriff had been remiss in the performance of his duties during the public auction sale. Indeed it would be injudicious for us to assume, as petitioners want us to do, that the sheriff failed to follow the established procedures governing public auctions.

On the contrary, a review of the records shows that the sheriff complied with the rules on public auction. The sale of the City’s vehicle was made publicly in front of the Caloocan City Hall on the date fixed in the notice – July 27, 1992. In fact, petitioners in their Motion to Declare in Contempt of Court; to Set Aside the Garnishment and Administrative Complaint admitted as much:

On July 27, 1992, by virtue of an alias writ of execution issued by the respondent court, a vehicle owned by the petitioner xxx was levied and sold at public auction for the amount of P100,000.00 and which amount was immediately delivered to the private respondent x x x x21

Hence, petitioners cannot now be heard to impugn the validity of the auction sale.

Petitioners, in desperation, likewise make much of the proceedings before the trial court on October 8, 1992, wherein petitioner Norma Abracia, Superintendent of the Division of City Schools of Caloocan, was commanded to appear and show cause why she should not be cited in contempt for delaying the execution of judgment. This was in connection with her failure (or refusal) to surrender the three motor vehicles assigned to the Division of City Schools to the custody of the sheriff. Petitioner Abracia, assisted by Mr. Ricardo Nagpacan of the Division of City Schools, appeared during the hearing but requested a ten-day period within which to refer the matter of contempt to a counsel of her choice. The request was denied by Judge Allarde in his assailed order dated October 8, 1992. Thus petitioner Abracia claimed, inter alia, that: (a) she was denied due process; (b) the silence of the order of Judge Allarde on her request for time violated an orderly and faithful recording of the proceedings, and (c) she was coerced into agreeing to surrender the vehicles.

We do not think so. What violates due process is the absolute lack of opportunity to be heard. That opportunity, the Court is convinced, was sufficiently accorded to petitioner Abracia. She was notified of the contempt charge against her; she was effectively assisted by counsel when she appeared during the hearing on October 8, 1992; and she was afforded ample opportunity to answer and refute the charge against her. The circumstance that she opted not to avail of her chance to be heard on that occasion by asking for an extension of time within which to hire a counsel of her choice, a request denied by the trial court, did not transgress nor deprive her of her right to due process.

Significantly, during the hearing on October 8, 1992, Mr. Nagpacan manifested in open court that, after conferring with petitioner Abracia, the latter was "willing to surrender these vehicles into the custody of the sheriff on the condition that the standing motion (for contempt) be withdrawn."22 Her decision was made freely and voluntarily, and after conferring with her counsel. Moreover, it was petitioner Abracia herself who imposed the condition that respondent Santiago should withdraw her motion for contempt in exchange for her promise to surrender the subject vehicles. Thus, petitioner Abracia’s claim that she was coerced into surrendering the vehicles had no basis.

Even assuming ex gratia argumenti that there indeed existed certain legal infirmities in connection with the assailed orders of Judge Allarde, still, considering the totality of circumstances of this case, the nullification of the contested orders would be way out of line. For 21 long years, starting 1972 when this controversy started up to 1993 when her claim was fully paid out of the garnished funds of the City of Caloocan, respondent Santiago was cruelly and unjustly deprived of what was due her. It would be, at the very least, merciless and unchristian to make private respondent refund the City of Caloocan the amount already paid to her, only to force her to go through the same nightmare all over again.

At any rate, of paramount importance to us is that justice has been served. No right of the public was violated and public interest was preserved.

Finally, we cannot simply pass over in silence the deplorable act of the former Mayor of Caloocan City in refusing to sign the check in payment of the City’s obligation to private respondent. It was an open defiance of judicial processes, smacking of political arrogance, and a direct violation of the very ordinance he himself approved. Our Resolution in G.R. No. 98366, City Government of Caloocan vs. Court of Appeals, et al., dated May 16, 1991, dismissing the petition of the City of Caloocan assailing the issuance of a writ of execution by the trial court, already resolved with finality all impediments to the execution of judgment in this case. Yet, the City Government of Caloocan, in a blatant display of malice and bad faith, refused to comply with the decision. Now, it has the temerity to come to this Court once more and continue inflicting injustice on a hapless citizen, as if all the harm and prejudice it has already heaped upon respondent Santiago are still not enough.

This Court will not condone the repudiation of just obligations contracted by municipal corporations. On the contrary, we will extend our aid and every judicial facility to any citizen in the enforcement of just and valid claims against abusive local government units.

WHEREFORE, the petition is hereby DISMISSED for utter lack of merit. The assailed orders of the trial court dated October 1, 1992, October 8, 1992 and May 7, 1993, respectively, are AFFIRMED.

Petitioners and their counsels are hereby warned against filing any more pleadings in connection with the issues already resolved with finality herein and in related cases.

Page 21 of 28

Costs against petitioners.

SO ORDERED.

Page 22 of 28

G.R. No. 163609 November 27, 2008

SPS. BUENAVENTURA JAYME AND ROSARIO JAYME, petitioners, vs.RODRIGO APOSTOL, FIDEL LOZANO, ERNESTO SIMBULAN, MAYOR FERNANDO Q. MIGUEL, MUNICIPALITY OF KORONADAL (NOW CITY OF KORONADAL), PROVINCE OF SOUTH COTABATO, represented by the MUNICIPAL TREASURER and/or MUNICIPAL MAYOR FERNANDO Q. MIGUEL, and THE FIRST INTEGRATED BONDING AND INSURANCE COMPANY, INC., respondents.

D E C I S I O N

REYES, R.T., J.:

MAY a municipal mayor be held solidarily liable for the negligent acts of the driver assigned to him, which resulted in the death of a minor pedestrian?

Challenged in this petition for review on certiorari is the Decision1 of the Court of Appeals (CA) which reversed and set aside the decision of the Regional Trial Court (RTC), Polomolok, Cotabato City, Branch 39, insofar as defendant Mayor Fernando Q. Miguel is concerned. The CA absolved Mayor Miguel from any liability since it was not he, but the Municipality of Koronadal, that was the employer of the negligent driver.

The Facts

On February 5, 1989, Mayor Miguel of Koronadal, South Cotabato was on board the Isuzu pick-up truck driven by Fidel Lozano, an employee of the Municipality of Koronadal.2 The pick-up truck was registered under the name of Rodrigo Apostol, but it was then in the possession of Ernesto Simbulan.3 Lozano borrowed the pick-up truck from Simbulan to bring Miguel to Buayan Airport at General Santos City to catch his Manila flight.4

The pick-up truck accidentally hit Marvin C. Jayme, a minor, who was then crossing the National Highway in Poblacion, Polomolok, South Cotabato.5 The intensity of the collision sent Marvin some fifty (50) meters away from the point of impact, a clear indication that Lozano was driving at a very high speed at the time of the accident.6

Marvin sustained severe head injuries with subdural hematoma and diffused cerebral contusion.7 He was initially treated at the Howard Hubbard Memorial Hospital.8 Due to the seriousness of his injuries, he was airlifted to the Ricardo Limso Medical Center in Davao City for more intensive treatment.9 Despite medical attention, Marvin expired six (6) days after the accident.10

Petitioners spouses Buenaventura and Rosario Jayme, the parents of Marvin, filed a complaint for damages with the RTC against respondents.11 In their complaint, they prayed that all respondents be held solidarily liable for their loss. They pointed out that that proximate cause of Marvin's death was Lozano's negligent and reckless operation of the vehicle. They prayed for actual, moral, and exemplary damages, attorney's fees, and litigation expenses.

In their respective Answers, all respondents denied liability for Marvin's death. Apostol and Simbulan averred that Lozano took the pick-up truck without their consent. Likewise, Miguel and Lozano pointed out that Marvin's sudden sprint across the highway made it impossible to avoid the accident. Yet, Miguel denied being on board the vehicle when it hit Marvin. The Municipality of Koronadal adopted the answer of Lozano and Miguel. As for First Integrated Bonding and Insurance Company, Inc., the vehicle insurer, it insisted that its liability is contributory and is only conditioned on the right of the insured. Since the insured did not file a claim within the prescribed period, any cause of action against it had prescribed.

RTC Disposition

On January 25, 1999, the RTC rendered judgment in favor of spouses Jayme, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, the defendant Municipality of Koronadal cannot be held liable for the damages incurred by other defendant (sic) being an agency of the State performing a (sic) governmental functions. The same with defendant Hermogenes Simbulan, not being the owner of the subject vehicle, he is absolved of any liability. The complaint against defendant First Integrated Bonding Insurance Company, Inc. is hereby ordered dismissed there being no cause of action against said insurance company.

However, defendants Fidel Lozano, Rodrigo Apostol, and Mayor Fernando Miguel of Koronadal, South Cotabato, are hereby ordered jointly and severally to pay the plaintiff (sic) the following sums:

1. One Hundred Seventy Three Thousand One Hundred One and Forty Centavos (P173,101.40) Pesos as actual damages with legal interest of 12% per annum computed from February 11, 1989 until fully paid;

2. Fifty Thousand (P50,000.00) Pesos as moral damages;

3. Twenty Thousand (P20,000.00) Pesos as exemplary damages;

4. Twenty Thousand (P20,000.00) Pesos as Attorney's fees;

5. Fifty Thousand (P50,000.00) Pesos for the death of Marvin Jayme;

6. Three Thousand (P3,000.00) as litigation expenses; and

7. To pay the cost of this suit.

Page 23 of 28

SO ORDERED.12

Dissatisfied with the RTC ruling, Mayor Miguel interposed an appeal to the CA.

CA Disposition

In his appeal, Mayor Miguel contended that the RTC erred in ruling that he was Lozano's employer and, hence, solidarily liable for the latter's negligent act. Records showed that the Municipality of Koronadal was the driver's true and lawful employer. Mayor Miguel also denied that he did not exercise due care and diligence in the supervision of Lozano. The incident, although unfortunate, was unexpected and cannot be attributed to him.

On October 22, 2003, the CA granted the appeal, disposing as follows:

WHEREFORE, the Decision appealed from is REVERSED and SET ASIDE, insofar as defendant-appellant Mayor Fernando Q. Miguel is concerned, and the complaint against him is DISMISSED.

IT IS SO ORDERED.13

The CA held that Mayor Miguel should not be held liable for damages for the death of Marvin Jayme. Said the appellate court:

Moreover, plaintiffs-appellees admitted that Mayor Miguel was not the employer of Lozano. Thus, paragraph 9 of the complaint alleged that the Municipality of Koronadal was the employer of both Mayor Miguel and Lozano. Not being the employer of Lozano, Mayor Miguel could not thus be held liable for the damages caused by the former. Mayor Miguel was a mere passenger in the Isuzu pick-up at the time of the accident.14 (Emphasis supplied)

The CA also reiterated the settled rule that it is the registered owner of a vehicle who is jointly and severally liable with the driver for damages incurred by passengers or third persons as a consequence of injuries or death sustained in the operation of the vehicle.

Issues

The spouses Jayme have resorted to the present recourse and assign to the CA the following errors:

I.THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT MAYOR FERNANDO MIGUEL CANNOT BE HELD LIABLE FOR THE DEATH OF MARVIN JAYME WHICH CONCLUSION IS CONTRARY TO LAW AND THE SETTLED PRONOUNCEMENTS OF THIS HONORABLE TRIBUNAL;

II.THE FINDINGS OF FACTS OF THE HONORABLE COURT OF APPEALS ARE CONTRARY TO THE FINDINGS OF THE TRIAL COURT AND ARE CONTRADICTED BY THE EVIDENCE ON RECORD; MOREOVER, THE CONCLUSIONS DRAWN BY THE HONORABLE COURT OF APPEALS ARE ALL BASED ON CONJECTURES AND SURMISES AND AGAINST ACCEPTED COURSE OF JUDICIAL PROCEEDINGS WHICH URGENTLY CALL FOR AN EXERCISE OF THIS HONORABLE COURT'S SUPERVISION.15

Our Ruling

The doctrine of vicarious liability or imputed liability finds no application in the present case.

Spouses Jayme contend, inter alia, that vicarious liability attaches to Mayor Miguel. He was not a mere passenger, but instead one who had direct control and supervision over Lozano during the time of the accident. According to petitioners, the element of direct control is not negated by the fact that Lozano's employer was the Municipality of Koronadal. Mayor Miguel, being Lozano's superior, still had control over the manner the vehicle was operated.

Article 218016 of the Civil Code provides that a person is not only liable for one's own quasi-delictual acts, but also for those persons for whom one is responsible for. This liability is popularly known as vicarious or imputed liability. To sustain claims against employers for the acts of their employees, the following requisites must be established: (1) That the employee was chosen by the employer personally or through another; (2) That the service to be rendered in accordance with orders which the employer has the authority to give at all times; and (3) That the illicit act of the employee was on the occasion or by reason of the functions entrusted to him.17

Significantly, to make the employee liable under paragraphs 5 and 6 of Article 2180, it must be established that the injurious or tortuous act was committed at the time the employee was performing his functions.18

Furthermore, the employer-employee relationship cannot be assumed. It is incumbent upon the plaintiff to prove the relationship by preponderant evidence. In Belen v. Belen,19 this Court ruled that it was enough for defendant to deny an alleged employment relationship. The defendant is under no obligation to prove the negative averment. This Court said:

It is an old and well-settled rule of the courts that the burden of proving the action is upon the plaintiff, and that if he fails satisfactorily to show the facts upon which he bases his claim, the defendant is under no obligation to prove his exceptions. This rue is in harmony with the provisions of Section 297 of the Code of Civil Procedure holding that each party must prove his own affirmative allegations, etc.20

In resolving the present controversy, it is imperative to find out if Mayor Miguel is, indeed, the employer of Lozano and therefore liable for the negligent acts of the latter. To determine the existence of an employment relationship, We rely on the four-fold test. This involves: (1) the employer's power of selection; (2) payment of wages or other remuneration; (3) the employer's right to control the method of doing the work; and (4) the employer's right of suspension or dismissal.21

Page 24 of 28

Applying the foregoing test, the CA correctly held that it was the Municipality of Koronadal which was the lawful employer of Lozano at the time of the accident. It is uncontested that Lozano was employed as a driver by the municipality. That he was subsequently assigned to Mayor Miguel during the time of the accident is of no moment. This Court has, on several occasions, held that an employer-employee relationship still exists even if the employee was loaned by the employer to another person or entity because control over the employee subsists.22 In the case under review, the Municipality of Koronadal remains to be Lozano's employer notwithstanding Lozano's assignment to Mayor Miguel.

Spouses Jayme argued that Mayor Miguel had at least supervision and control over Lozano and how the latter operated or drove the Isuzu pick-up during the time of the accident. They, however, failed to buttress this claim.

Even assuming arguendo that Mayor Miguel had authority to give instructions or directions to Lozano, he still can not be held liable. In Benson v. Sorrell,23 the New England Supreme Court ruled that mere giving of directions to the driver does not establish that the passenger has control over the vehicle. Neither does it render one the employer of the driver. This Court, in Soliman, Jr. v. Tuazon,24 ruled in a similar vein, to wit:

x x x The fact that a client company may give instructions or directions to the security guards assigned to it, does not, by itself, render the client responsible as an employer of the security guards concerned and liable for their wrongful acts and omissions. Those instructions or directions are ordinarily no more than requests commonly envisaged in the contract for services entered into with the security agency. x x x25 (Emphasis supplied)

Significantly, no negligence may be imputed against a fellow employee although the person may have the right to control the manner of the vehicle's operation.26 In the absence of an employer-employee relationship establishing vicarious liability, the driver's negligence should not be attributed to a fellow employee who only happens to be an occupant of the vehicle.27 Whatever right of control the occupant may have over the driver is not sufficient by itself to justify an application of the doctrine of vicarious liability. Handley v. Lombardi28 is instructive on this exception to the rule on vicarious liability:

Plaintiff was not the master or principal of the driver of the truck, but only an intermediate and superior employee or agent. This being so, the doctrine of respondeat superior or qui facit per alium is not properly applicable to him. His power to direct and control the driver was not as master, but only by virtue of the fact that they were both employed by Kruse, and the further fact that as Kruse's agent he was delegated Kruse's authority over the driver. x x x

In the case of actionable negligence, the rule is well settled both in this state and elsewhere that the negligence of a subordinate employee or subagent is not to be imputed to a superior employee or agent, but only to the master or principal. (Hilton v. Oliver, 204 Cal. 535 [61 A. L. R. 297, 269 Pac. 425; Guild v. Brown, 115 Cal. App. 374 [1 Pac. (2d) 528; Ellis v. Southern Ry. Co., 72 S. C. 464 [2 L. R. A. (N. S.) 378, 52 S. E. 228; Thurman v. Pittsburg & M. Copper Co., 41 Mont. 141 [108 Pac. 588]; 2 Cor. Jur., p. 829; and see the elaborate note in 61 A. L. R. 277, and particularly that part commencing at p. 290.) We can see no logical reason for drawing any distinction in this regard between actionable negligence and contributory negligence. x x x29

The rule was reiterated in Bryant v. Pacific Elec. Ry. Co.[30 and again in Sichterman v. Hollingshead Co.31

In Swanson v. McQuown,32 a case involving a military officer who happened to be riding in a car driven by a subordinate later involved in an accident, the Colorado Supreme Court adhered to the general rule that a public official is not liable for the wrongful acts of his subordinates on a vicarious basis since the relationship is not a true master-servant situation.33 The court went on to rule that the only exception is when they cooperate in the act complained of, or direct or encourage it.34

In the case at bar, Mayor Miguel was neither Lozano's employer nor the vehicle's registered owner. There existed no causal relationship between him and Lozano or the vehicle used that will make him accountable for Marvin's death. Mayor Miguel was a mere passenger at the time of the accident.

Parenthetically, it has been held that the failure of a passenger to assist the driver, by providing him warnings or by serving as lookout does not make the passenger liable for the latter's negligent acts.35 The driver's duty is not one that may be delegated to others.36

As correctly held by the trial court, the true and lawful employer of Lozano is the Municipality of Koronadal. Unfortunately for Spouses Jayme, the municipality may not be sued because it is an agency of the State engaged in governmental functions and, hence, immune from suit. This immunity is illustrated in Municipality of San Fernando, La Union v. Firme,37 where this Court held:

It has already been remarked that municipal corporations are suable because their charters grant them the competence to sue and be sued. Nevertheless, they are generally not liable for torts committed by them in the discharge of governmental functions and can only be held answerable only if it can be shown that they were acting in proprietary capacity. In permitting such entities to be sued, the State merely gives the claimant the right to show that the defendant was not acting in governmental capacity when the injury was committed or that the case comes under the exceptions recognized by law. Failing this, the claimant cannot recover.38

Verily, liability attaches to the registered owner, the negligent driver and his direct employer. The CA observation along this line are worth restating:

Settled is the rule that the registered owner of a vehicle is jointly and severally liable with the driver for damages incurred by passengers and third persons as a consequence of injuries or death sustained in the operation of said vehicles. Regardless of who the actual owner of the vehicle is, the operator of record continues to be the operator of the vehicle as regards the public and third persons, and as such is directly and primarily responsible for the consequences incident (sic) to its operation x x x.39

The accidental death of Marvin Jayme is a tragic loss for his parents. However, justice demands that only those liable under our laws be held accountable for Marvin's demise. Justice can not sway in favor of petitioners simply to assuage their pain and loss. The law on the matter is clear: only the negligent driver, the driver's employer, and the registered owner of the vehicle are liable for the death of a third person resulting from the negligent operation of the vehicle. WHEREFORE, the petition is DENIED and the appealed Decision AFFIRMED. SO ORDERED.

Page 25 of 28

G.R. No. 188818 May 31, 2011TOMAS R. OSMEÑA, in his personal capacity and in his capacity as City Mayor of Cebu City, Petitioner,

vs.THE COMMISSION ON AUDIT, Respondent.

BRION, J.:

Before the Court is the Petition for Certiorari1 filed by Tomas R. Osmeña, former mayor of the City of Cebu, under Rule 64 of the Rules of Court. The petition seeks the reversal of the May 6, 2008 Decision2 and the June 8, 2009 Resolution3 of the respondent Commission on Audit (COA), which disallowed the damages, attorney’s fees and litigation expenses awarded in favor of two construction companies in the collection cases filed against the City of Cebu, and made these charges the personal liability of Osmeña for his failure to comply with the legal requirements for the disbursement of public funds.

BACKGROUND FACTS

The City of Cebu was to play host to the 1994 Palarong Pambansa (Palaro). In preparation for the games, the City engaged the services of WT Construction, Inc. (WTCI) and Dakay Construction and Development Company (DCDC) to construct and renovate the Cebu City Sports Complex. Osmeña, then city mayor, was authorized by the Sangguniang Panlungsod (Sanggunian) of Cebu to represent the City and to execute the construction contracts.

While the construction was being undertaken, Osmeña issued a total of 20 Change/Extra Work Orders to WTCI, amounting to P35,418,142.42 (about 83% of the original contract price), and to DCDC, amounting to P15,744,525.24 (about 31% of the original contract price). These Change/Extra Work Orders were not covered by any Supplemental Agreement, nor was there a prior authorization from the Sanggunian. Nevertheless, the work proceeded on account of the "extreme urgency and need to have a suitable venue for the Palaro."4 The Palaro was successfully held at the Cebu City Sports Complex during the first six months of 1994.

Thereafter, WTCI and DCDC demanded payment for the extra work they performed in the construction and renovation of the sports complex. A Sanggunian member, Councilor Augustus Young, sponsored a resolution authorizing Osmeña to execute the supplemental agreements with WTCI and DCDC to cover the extra work performed, but the other Sanggunian members refused to pass the resolution. Thus, the extra work completed by WTCI and DCDC was not covered by the necessary appropriation to effect payment, prompting them to file two separate collection cases before the Regional Trial Court (RTC) of Cebu City (Civil Case Nos. CEB-170045 and CEB-171556 ). The RTC found the claims meritorious, and ordered the City to pay for the extra work performed. The RTC likewise awarded damages, litigation expenses and attorney’s fees in the amount of P2,514,255.40 to WTCI7 and P102,015.00 to DCDC.8 The decisions in favor of WTCI and DCDC were affirmed on appeal, subject to certain modifications as to the amounts due, and have become final. To satisfy the judgment debts, the Sanggunian finally passed the required appropriation ordinances.

During post-audit, the City Auditor issued two notices disallowing the payment of litigation expenses, damages, and attorney’s fees to WTCI and DCDC.9 The City Auditor held Osmeña, the members of the Sanggunian, and the City Administrator liable for the P2,514,255.40 and P102,015.00 awarded to WTCI and DCDC, respectively, as damages, attorney’s fees, and interest charges. These amounts, the City Auditor concluded, were unnecessary expenses for which the public officers should be held liable in their personal capacities pursuant to the law.

Osmeña and the members of the Sanggunian sought reconsideration of the disallowance with the COA Regional Office, which, through a 2nd Indorsement dated April 30, 2003,10 modified the City Auditor’s Decision by absolving the members of the sanggunian from any liability. It declared that the payment of the amounts awarded as damages and attorney’s fees should solely be Osmeña’s liability, as it was him who ordered the change or extra work orders without the supplemental agreement required by law, or the prior authorization from the Sanggunian. The Sanggunian members cannot be held liable for refusing to enact the necessary ordinance appropriating funds for the judgment award because they are supposed to exercise their own judgment and discretion in the performance of their functions; they cannot be mere "rubber stamps" of the city mayor.

The COA Regional Office’s Decision was sustained by the COA’s National Director for Legal and Adjudication (Local Sector) in a Decision dated January 16, 2004.11 Osmeña filed an appeal against this Decision.

On May 6, 2008, the COA issued the assailed Decision which affirmed the notices of disallowance.12 Osmeña received a copy of the Decision on May 23, 2008. Eighteen days after or on June 10, 2008, Osmeña filed a motion for reconsideration of the May 6, 2008 COA Decision.

The COA denied Osmeña’s motion via a Resolution dated June 8, 2009.13 The Office of the Mayor of Cebu City received the June 8, 2009 Resolution of the COA on June 29, 2009. A day before, however, Osmeña left for the United States of America for his check-up after his cancer surgery in April 2009 and returned to his office only on July 15, 2009. Thus, it was only on July 27, 2009 that Osmeña filed the present petition for certiorari under Rule 64 to assail the COA’s Decision of May 6, 2008 and Resolution of June 8, 2009.

THE PETITION

Rule 64 of the Rules of Court governs the procedure for the review of judgments and final orders or resolutions of the Commission on Elections and the COA. Section 3 of the same Rule provides for a 30-day period, counted from the notice of the judgment or final order or resolution sought to be reviewed, to file the petition for certiorari. The Rule further states that the filing of a motion for reconsideration of the said judgment or final order or resolution interrupts the 30-day period.

Osmeña filed his motion for reconsideration, of the COA’s May 6, 2008 Decision, 18 days from his receipt thereof, leaving him with 12 days to file a Rule 64 petition against the COA ruling. He argues that the remaining period should be counted not from the receipt of the COA’s June 8, 2009 Resolution by the Office of the Mayor of Cebu City on June 29, 2009, but from the time he officially reported back to his office on July 15, 2009, after his trip abroad. Since he is being made liable in his personal capacity, he reasons that the remaining period should be counted from his actual knowledge of the denial of his motion for reconsideration. Corollary, he needed time to hire a private counsel who would review his case and prepare the petition.

Osmeña pleads that his petition be given due course for the resolution of the important issues he raised. The damages and interest charges were awarded on account of the delay in the payment of the extra work done by WTCI and DCDC, which delay Osmeña attributes to the refusal of the Sanggunian to appropriate the necessary amounts. Although Osmeña acknowledges the legal necessity for a supplemental

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agreement for any extra work exceeding 25% of the original contract price, he justifies the immediate execution of the extra work he ordered (notwithstanding the lack of the supplemental agreement) on the basis of the extreme urgency to have the construction and repairs on the sports complex completed in time for the holding of the Palaro. He claims that the contractors themselves did not want to embarrass the City and, thus, proceeded to perform the extra work even without the supplemental agreement.

Osmeña also points out that the City was already adjudged liable for the principal sum due for the extra work orders and had already benefitted from the extra work orders by accepting and using the sports complex for the Palaro. For these reasons, he claims that all consequences of the liability imposed, including the payment of damages and interest charges, should also be shouldered by the City and not by him.

THE COURT’S RULING

Relaxation of procedural rules to give effect to a party’s right to appeal

Section 3, Rule 64 of the Rules of Court states:

SEC. 3. Time to file petition.—The petition shall be filed within thirty (30) days from notice of the judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of denial. [Emphasis ours.]

Several times in the past, we emphasized that procedural rules should be treated with utmost respect and due regard, since they are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in the resolution of rival claims and in the administration of justice. From time to time, however, we have recognized exceptions to the Rules but only for the most compelling reasons where stubborn obedience to the Rules would defeat rather than serve the ends of justice. Every plea for a liberal construction of the Rules must at least be accompanied by an explanation of why the party-litigant failed to comply with the Rules and by a justification for the requested liberal construction.14 Where strong considerations of substantive justice are manifest in the petition, this Court may relax the strict application of the rules of procedure in the exercise of its legal jurisdiction.15

Osmeña cites the mandatory medical check-ups he had to undergo in Houston, Texas after his cancer surgery in April 2009 as reason for the delay in filing his petition for certiorari. Due to his weakened state of health, he claims that he could not very well be expected to be bothered by the affairs of his office and had to focus only on his medical treatment. He could not require his office to attend to the case as he was being charged in his personal capacity.

We find Osmeña’s reasons sufficient to justify a relaxation of the Rules. Although the service of the June 8, 2009 Resolution of the COA was validly made on June 29, 2009 through the notice sent to the Office of the Mayor of Cebu City,16 we consider July 15, 2009 – the date he reported back to office – as the effective date when he was actually notified of the resolution, and the reckoning date of the period to appeal. If we were to rule otherwise, we would be denying Osmeña of his right to appeal the Decision of the COA, despite the merits of his case.

Moreover, a certiorari petition filed under Rule 64 of the Rules of Court must be verified, and a verification requires the petitioner to state under oath before an authorized officer that he has read the petition and that the allegations therein are true and correct of his personal knowledge. Given that Osmeña was out of the country to attend to his medical needs, he could not comply with the requirements to perfect his appeal of the Decision of the COA.

While the Court has accepted verifications executed by a petitioner’s counsel who personally knows the truth of the facts alleged in the pleading, this was an alternative not available to Osmeña, as he had yet to secure his own counsel. Osmeña could not avail of the services of the City Attorney, as the latter is authorized to represent city officials only in their official capacity.17 The COA pins liability for the amount of damages paid to WTCI and DCDC on Osmeña in his personal capacity, pursuant to Section 103 of Presidential Decree No. 1445 (PD 1445).18

Thus, the reckoning date to count the remaining 12 days to file his Rule 64 petition should be counted from July 15, 2009, the date Osmeña had actual knowledge of the denial of his motion for reconsideration of the Decision of the COA and given the opportunity to competently file an appeal thereto before the Court. The present petition, filed on July 27, 2009, was filed within the reglementary period.

Personal liability for expenditures of government fund when made in violation of law

The Court’s decision to adopt a liberal application of the rules stems not only from humanitarian considerations discussed earlier, but also on our finding of merit in the petition.

Section 103 of PD 1445 declares that "[e]xpenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor." Notably, the public official’s personal liability arises only if the expenditure of government funds was made in violation of law. In this case, the damages were paid to WTCI and DCDC pursuant to final judgments rendered against the City for its unreasonable delay in paying its obligations. The COA, however, declared that the judgments, in the first place, would not be rendered against the City had it not been for the change and extra work orders that Osmeña made which (a) it considered as unnecessary, (b) were without the Sanggunian’s approval, and (c) were not covered by a supplemental agreement.

The term "unnecessary," when used in reference to expenditure of funds or uses of property, is relative. In Dr. Teresita L. Salva, etc. v. Guillermo N. Carague, etc., et al.,19 we ruled that "[c]ircumstances of time and place, behavioural and ecological factors, as well as political, social and economic conditions, would influence any such determination. x x x [T]ransactions under audit are to be judged on the basis of not only the standards of legality but also those of regularity, necessity, reasonableness and moderation." The 10-page letter of City Administrator Juan Saul F. Montecillo to the Sanggunian explained in detail the reasons for each change and extra work order; most of which were made to address security and safety concerns that may arise not only during the holding of the Palaro, but also in other events and activities that may later be held in the sports complex. Comparing this with the COA’s general and unsubstantiated declarations that the expenses were "not essential"20 and not "dictated by the demands of good government,"21 we find that the expenses incurred for change and extra work orders were necessary and justified.

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The COA considers the change and extra work orders illegal, as these failed to comply with Section III, C1 of the Implementing Rules and Regulations of Presidential Decree No. 1594,22 which states that:

5. Change Orders or Extra Work Orders may be issued on a contract upon the approval of competent authorities provided that the cumulative amount of such Change Orders or Extra Work Orders does not exceed the limits of the former's authority to approve original contracts.

6. A separate Supplemental Agreement may be entered into for all Change Orders and Extra Work Orders if the aggregate amount exceeds 25% of the escalated original contract price. All change orders/extra work orders beyond 100% of the escalated original contract cost shall be subject to public bidding except where the works involved are inseparable from the original scope of the project in which case negotiation with the incumbent contractor may be allowed, subject to approval by the appropriate authorities. [Emphases ours.]

Reviewing the facts of the case, we find that the prevailing circumstances at the time the change and extra work orders were executed and completed indicate that the City of Cebu tacitly approved these orders, rendering a supplemental agreement or authorization from the Sanggunian unnecessary.1âwphi1

The Pre-Qualification, Bids and Awards Committee (PBAC), upon the recommendation of the Technical Committee and after a careful deliberation, approved the change and extra work orders. It bears pointing out that two members of the PBAC were members of the Sanggunian as well – Rodolfo Cabrera (Chairman, Committee on Finance) and Ronald Cuenco (Minority Floor Leader). A COA representative was also present during the deliberations of the PBAC. None of these officials voiced any objection to the lack of a prior authorization from the Sanggunian or a supplemental agreement. The RTC Decision in fact mentioned that the Project Post Completion Report and Acceptance was approved by an authorized representative of the City of Cebu on September 21, 1994.23 "[a]s the projects had been completed, accepted and used by the [City of Cebu]," the RTC ruled that there is "no necessity of [executing] a supplemental agreement."24 Indeed, as we declared in Mario R. Melchor v. COA,25 a supplemental agreement to cover change or extra work orders is not always mandatory, since the law adopts the permissive word "may." Despite its initial refusal, the Sanggunian was eventually compelled to enact the appropriation ordinance in order to satisfy the RTC judgments. Belated as it may be, the enactment of the appropriation ordinance, nonetheless, constitutes as sufficient compliance with the requirements of the law. It serves as a confirmatory act signifying the Sanggunian’s ratification of all the change and extra work orders issued by Osmeña. In National Power Corporation (NPC) v. Hon. Rose Marie Alonzo-Legasto, etc., et al.,26 the Court considered the compromise agreement between the NPC and the construction company as a ratification of the extra work performed, without prior approval from the NPC’s Board of Directors.

As in Melchor,27 we find it "unjust to order the petitioner to shoulder the expenditure when the government had already received and accepted benefits from the utilization of the [sports complex]," especially considering that the City incurred no substantial loss in paying for the additional work and the damages awarded. Apparently, the City placed in a time deposit the entire funds allotted for the construction and renovation of the sports complex. The interest that the deposits earned amounted to P12,835,683.15, more than enough to cover the damages awarded to WTCI (P2,514,255.40) and the DCDC (P102,015.00). There was "no showing that [the] petitioner was ill-motivated, or that [the petitioner] had personally profited or sought to profit from the transactions, or that the disbursements have been made for personal or selfish ends."28 All in all, the circumstances showed that Osmeña issued the change and extra work orders for the City’s successful hosting of the Palaro, and not for any other "nefarious endeavour."29

WHEREFORE, in light of the foregoing, we hereby GRANT the petitioner’s Petition for Certiorari filed under Rule 64 of the Rules of Court. The respondent’s Decision of May 6, 2008 and Resolution of June 8, 2009 are SET ASIDE.

SO ORDERED.

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